Oral Answers to Questions

TRANSPORT

The Secretary of State was asked—

Road Pricing

Jim Devine: What assessment he has made of the potential of road pricing to cut congestion.

Kerry McCarthy: What recent discussions he has had with local highway authorities about road pricing.

Douglas Alexander: The initial work conducted by my Department indicates that a well-designed road pricing scheme could offer real potential to cut congestion. Last November my Department awarded pump-priming money to seven areas to develop innovative ways to tackle congestion. My officials and I continue to discuss with both those and other authorities what role road pricing could play in tackling congestion.

Jim Devine: Does my right hon. Friend agree that it is the height of hypocrisy for political parties to advocate green policies in this place but then, when it comes to making hard local decisions that need leadership, to run away, as they have in Fife, Lothian and London?

Douglas Alexander: I have consistently made clear my hope that we can sustain a national consensus on road pricing, but that consensus is more challenging when some parties choose to support national proposals in principle, but then actively work to make sure that congestion charging is not implemented on the ground, as happened in Edinburgh.

Kerry McCarthy: My right hon. Friend will be aware that many people are coming to the view that to tackle congestion we need not only road pricing pilot schemes but more local control over buses. What discussions has his Department had with Bristol city council on that matter, and if there have been no such discussions recently, is he prepared to meet council representatives?

Douglas Alexander: Conversations continue with the Greater Bristol authorities, which are among the authorities I mentioned that have secured pump-priming money to investigate ways to tackle congestion. I have always made it clear that I regard road pricing as one element of the strategy; another element—a key element—is an improvement in the quality of public transport. Given the significant number of public transport journeys that are made by bus, I charged myself and the Under-Secretary of State for Transport, my hon. Friend the Member for Lincoln (Gillian Merron), who is responsible for buses, over the summer to take a long, hard look at bus provision not only in London but across the country. I hope to be able to make proposals in due course.

John Leech: Passenger transport authorities have been advised to include road pricing schemes that make use of existing technology in any bid to the transport innovation fund. Given that the schemes are supposed to be pilot schemes in preparation for a national scheme, is it not possible that advancing technology will negate their usefulness as a way of assessing the viability of a national scheme?

Douglas Alexander: I am not sure that I accept the logic of the hon. Gentleman's question. We have allocated £10 million from the Department for Transport to research into precisely those technological issues. I spoke at the intelligent transport systems congress that took place here in London only last week, and between the delegates from around the world there was strong discussion of the potential for finding technological solutions to road pricing. The logic of conducting the pilots is to ensure not only that the technologies work on the ground, but that we have experience in communities across Britain before we move towards a national scheme, if that is what we decide to do.

Adam Price: Hundreds of Irish haulage firms use the M4-A40 as one of their main transit routes into the European Union. While the Government continue to dither, what can local authorities along those trans-European networks do now to recoup some of the costs incurred from foreign hauliers that currently do not contribute a penny?

Douglas Alexander: We continue to discuss that challenge with the road haulage industry. Work on the foreign lorry road user charge is now being developed as part of the work on a national system of road pricing. However, I recognise that there are continuing challenges, in particular in relation to cabotage, which is why we continue to discuss such matters with the industry.

Lynda Waltho: It has been estimated that this year congestion will cost the west midlands approximately £2.2 billion. In the light of that, will my right hon. Friend comment on the outcome of his discussions with the west midlands authorities and his early assessment of the transport innovation fund bid?

Douglas Alexander: Tempting though it is to offer a running commentary on each of the transport innovation fund bids that we have received, I shall resist. Suffice it to say that I met the west midlands authorities in July and heard directly from them about the work that they are doing. Since then we have received the west midlands congestion management study, which is with my Department for consideration.

Owen Paterson: We are interested in the merits of dynamic and variable road pricing to reduce congestion, but we do not quite understand why, following the collapse of the lorry road user charge scheme, the Government are setting up a number of unco-ordinated tag and beacon congestion schemes. Is it the Secretary of State's intention to set up a national road pricing scheme?

Douglas Alexander: The hon. Gentleman is simply wrong to say that there are to be a number of unco-ordinated projects across the country. The rationale behind the pilots is to make sure that we have both the experience on the ground from the individual pilots, and scaleable propositions in respect of the technology, which could inform discussions on the national scheme. I struggle with the Opposition's position. In principle they say that they are interested in the scheme. They then criticise it as potentially involving a massive use of public money for a Government computing system—yet they appear to resist the pilot system, which seems the perfect answer to taking forward public support for the scheme and learning the technology lessons that need to be learned.

David Clelland: But what would be the point of introducing road pricing in a locality unless the local authority in the area concerned had some power to introduce alternative public service provision? Will my right hon. Friend guarantee to the House that no road pricing system will be brought in unless the local authority concerned has new powers to regulate bus services in its area?

Douglas Alexander: In relation to the bids for the transport innovation fund, we have been clear that the kind of demand management measures, including road pricing, that local authorities are considering would be complementary to exactly the kind of improvement in public transport that my hon. Friend suggests. I have made it clear in recent weeks that I am concerned that the present free-for-all is not serving the public well in relation to bus services, and we will be publishing proposals on that in due course.

John Redwood: Will the Secretary of State give a pledge that when he recommends a scheme for national road pricing, it will not put an additional tax burden on British motorists and British road users, but will increase the burden on those who use the roads at popular times and will include taxing foreign use of our roads?

Douglas Alexander: At the previous Transport Question Time, I made it clear that the anticipated time scale, if a national road pricing scheme were to be developed, would be the middle of the next decade. The right hon. Gentleman cannot reasonably expect me to write the Budget for 2015 at the Dispatch Box today, but I will assure him that we recognise that if we were to move to a system of national road pricing, that could have an effect on systems of road transport taxation.

Road Improvements

Robert Flello: How many major trunk road and motorway schemes have been completed since 2001.

Stephen Ladyman: Thirty-nine major trunk road and motorway schemes in the Highways Agency's targeted programme of improvements have been completed since 2001.

Robert Flello: I am sure my right hon. and hon. Friends will agree that the completed £50 million-plus improvement work on the A500 through Stoke-on-Trent demonstrates the Labour Government's delivery to the people of north Staffordshire. Will my hon. Friend—or even my right hon. Friend the Secretary of State—take a trip up to north Staffordshire and Stoke-on-Trent to see that scheme, and the £10 million road bridge across the A50 opening up the Trentham Lakes development, providing the opportunity for more businesses to come into the area? Will my hon. Friend join me and welcome that?

Stephen Ladyman: I look forward to visiting my hon. Friend at some point in the future, but unfortunately, the delivery of the road scheme that he mentioned has been so efficient that it is to open at the end of the month, and neither my right hon. Friend the Secretary of State nor I can find a gap in our diaries to come and open it. My hon. Friend is right. This is a road scheme that could be delivered only because we have a Government committed to public investment, and we look forward to coming and seeing it for ourselves in the not-too-distant future.

Brooks Newmark: Consultation on the extension of the A120 between Braintree and Marks Tey was completed about 20 months ago. My constituents were promised a preferred route proposal, and we are still waiting for that proposal. Can the Government tell us when we will get it, and if, when it is proposed, there will be enough money left in the pot to complete it?

Stephen Ladyman: The information on the preferred route will be made available as soon as is practicable, but whether the money is available for the scheme will depend upon the regional funding allocation process. We will take the advice of the local region and local people as to what their priorities are. We have just sought that advice, and we stuck closely to it, so we have devolved responsibility for setting priorities to local people, and we will continue to do that in the future.

Gregory Barker: Will the Minister reconsider the proposed improvements on the A21 between Flimwell and Robertsbridge? The community there is extremely unhappy. There is no prospect of the completion of that road in the next few years, and the route is jeopardising the few employers in that part of my constituency. Will the Minister reconsider and address the concerns of the local community?

Stephen Ladyman: We are always keen to take account of the views of local people and stakeholders, but I am sure the hon. Gentleman will accept that it is often difficult to balance the different needs of the environment, a transport scheme and local businesses. We do the best we can. If people have constructive advice about how we can improve a route, we will consider it, but the delivery time of any scheme will depend on the advice of the regions. My advice to the hon. Gentleman and other Opposition Members is to work in their local regions to make sure that other people in the region understand the priority that they attach to a particular scheme, and work locally to raise the priority if the scheme if they do not think it will be delivered rapidly enough.

Terrorism

James Brokenshire: What measures he is taking to secure the transport network against terrorist attack.

Douglas Alexander: Working with police and other agencies, my Department works to maintain effective and proportionate security regimes that seek to minimise vulnerability across the transport networks. For obvious reasons it is not our practice to detail all of the required measures or procedures.

James Brokenshire: Since the terrorist attacks of 7 July 2005, the focus of attention has understandably been on the preparedness of the capital to respond to and deal with any future terrorist attack. However, we have seen from Madrid how other commuter or domestic rail services may be viewed as a potential target. What steps is the right hon. Gentleman taking to ensure that train operating companies are engaged in the threat reduction process, and what role does he see for the British Transport police in that regard now that the plans for the police merger have been dropped?

Douglas Alexander: I have discussed a range of such issues with the Association of Train Operating Companies as well as with the chief constable of the British Transport police. I am glad to say that following the conclusion of the review in relation to the future of the BTP we can now move forward, and those discussions will continue against a backdrop of significantly increased funding. Resource spending for the BTP has risen from £167 million in 2004, when the British Transport police authority was established, to £220 million now, and the number of police officers has increased by 20 per cent. during the last two years, up from 2,280 officers in 2004 to 2,780 officers in 2006. In addition, 200 police community support officers have been recruited in the last two years.

Barbara Keeley: I understand that Manchester airport did a very good job in handling the issues that arose at the difficult time of the enhanced threat of terrorist attacks in August; considering what passengers reported, it probably did better than elsewhere. Does my right hon. Friend therefore think it appropriate to ask Manchester to give some pointers from their better experience in handling such matters? Clearly we want to thank it for the good work that it did for my constituents and those from elsewhere, but we also need to understand why things went better at Manchester.

Douglas Alexander: I am delighted to join my hon. Friend in congratulating Manchester. I did so to the head of the Manchester Airport Group only last month, and it is a matter of public record that in my interviews on radio at the time I acknowledged the outstanding contribution that Manchester airport staff made in very challenging operational circumstances. I hope that my hon. Friend will also be reassured that we are in constant dialogue not just with BAA but with other airport operators about what lessons can be learned from the events of 10 August.

Paul Rowen: Is the Secretary of State aware that up to four police forces operate at airports such as Heathrow, with not one in overall control? May not that have contributed to some of the chaos that occurred during the summer, and will he carry out an independent review of the circumstances leading up to those events?

Douglas Alexander: The hon. Gentleman is right to the extent that there has been a review of policing at our airports, but on the basis of that report I am not convinced that it contributed to the challenges that we faced, which were very distinctive in relation to a particular alleged plot that was foiled on 10 August. I place on record my gratitude and admiration for the work that was taken forward, not just by BAA management but by trade unions, employees and many others at Heathrow airport. We should remember that, in the face of an unprecedented level of threat, the airport stayed open, a significant number of flights continued to operate, albeit with delay—and that Heathrow is literally the busiest airport in the world. In those circumstances, of course we should look at what lessons can be learned, but we should be careful about bandying around words such as "chaos".

Patrick Mercer: The House will be aware that the only successful terrorist attack to date has occurred against the transport system in London—but if we think that that will continue to be the case, clearly we are deluded. Can the Secretary of State therefore explain why anti-suicide-bomber barriers have already been mounted in places such as London Victoria, whereas places such as Manchester Victoria, and many of the other regional stations, have absolutely nothing?

Douglas Alexander: It is a matter of newspaper coverage that there has been a trial of such barriers here in London for a fixed period. While we evaluate the conclusions of that review, I would not wish to anticipate what steps we might take. I would also ask the indulgence and appreciation of the House for the fact that these are not matters that we often wish to discuss in public—but if it would be helpful to the hon. Gentleman, I will certainly write to him on the matter.

Traffic Officers

Jeff Ennis: How many Highways Agency traffic officers on average are deployed on motorways to help traffic flow better after accidents.

Stephen Ladyman: On average there are 120 patrols, each with a two-person crew, deployed on motorways to help keep traffic flowing. These are supported by approximately 50 control room staff proactively searching for and deploying traffic officers to incidents using various technology feeds including CCTV, motorway incident detection and automatic signalling, emergency roadside telephones and information from the emergency services.

Jeff Ennis: There is no doubt that traffic officers are doing a good job on the motorways in south Yorkshire, as well as in the rest of England and Wales. Does the Minister agree that in addition to looking at new road building schemes, we must improve capacity on existing roads? One of the best ways to achieve that goal is introducing effective ways of clearing up motorways after major accidents.

Stephen Ladyman: I entirely agree with my hon. Friend, who has touched on the rationale for the traffic officer scheme. We cannot build our way out of such problems. As I intimated in answering an earlier question, a significant road building programme is currently taking place, but it cannot be our total solution to congestion. We must find better ways to use existing capacity. My right hon. Friend the Secretary of State has discussed road pricing, which is one of the long-term solutions, but solutions such as traffic officers clearing away incidents very quickly and keeping traffic moving are also an important part of the picture, and they are proving to be extremely successful.

Andrew MacKay: Will the Minister accept that despite the deployment of Highways Agency traffic officers, it still takes far too long to clear up after accidents—far longer than it used to? That not only causes frustration for those who are using the motorway, but is potentially very dangerous. When will more be done to ensure that accidents are cleared up as quickly as they used to be?

Stephen Ladyman: I cannot speak for what used to happen in some long-distant, mythical past, although I suspect that it always took a great deal of time to clear up serious incidents. The whole purpose of the traffic officer scheme is that accidents that do not involve injury or criminal activity are cleared away very quickly. The traffic officers have very tight targets, and the early evidence suggests that they are succeeding in clearing away accidents very quickly. We have learned from the initial implementation of the scheme, and day by day traffic officers are getting better and better. They are increasingly able to co-ordinate their work with the police, and results are improving as a consequence. I promise the right hon. Gentleman that traffic officers will continue to learn from experience and that incidents will be cleared away as quickly as possible.

Gwyneth Dunwoody: Will my hon. Friend publish the evidence to the effect that those gentleman and ladies are performing well? And does he agree that it is essential that the powers to control and police highways remain within the control of properly trained police forces, and are never ceded to private or other interests?

Stephen Ladyman: I believe that the data from the first scheme in the west midlands have already been put in the public domain; if that is not the case, I will make it so as soon as the information is available. As soon as the schemes in other areas have operated for long enough to obtain some objective data, that data will be put in the public domain, too. I assure my hon. Friend that the early evidence suggests that the schemes are extremely effective. I entirely agree with her point about making sure that ultimate responsibility lies with the police. The work of the highways officers is totally co-ordinated with that of local police forces, and that is how it will stay.

John Bercow: In reflecting on the problem of delays caused by serious accidents, what assessment has the Minister made of the effect of the attention of drivers being diverted from the proper focus on what limited scope there is to move ahead, and on to the scene of the accident? And has he furrowed his brow and considered ways of disincentivising such unwelcome behaviour?

Stephen Ladyman: The hon. Gentleman, in his usual loquacious way, makes a constructive point. One of the mechanisms being considered is the possibility of constructing screens to hide incidents away, so that motorists will not be distracted—the so-called rubbernecking that is often the cause of another accident on the other side of the carriageway. For the reasons stated by the hon. Gentleman's right hon. Friend the Member for Bracknell (Mr. Mackay), we do not want to delay the clearing of debris following accidents by putting up screens when it may be better to get on with the clearance, but they are being considered where cost-effective and appropriate.

Road Network

Khalid Mahmood: What steps he is taking to improve management of the road network.

Stephen Ladyman: Most roads are managed by local authorities. The Traffic Management Act 2004 placed a duty on local authorities to manage their road network to ensure the expeditious movement of traffic on their network and those of surrounding authorities. The Act gives authorities additional tools better to manage parking policies, bus lane enforcement and the co-ordination of street works. The Act has also created traffic officers to help to keep traffic moving and to ensure safety on English motorways. They are deployed by the network of regional control centres which monitor the motorway network and deploy a range of other active traffic management techniques, such as access control and hard shoulder running, to ease congestion.

Khalid Mahmood: What assessment has my hon. Friend made of the prospective traffic management system on the M42, and an experiment to use the hard shoulder?

Stephen Ladyman: I can assure my hon. Friend that before we opened up the M42 to the active traffic management scheme and hard shoulder running, we took base data so that we were aware of the existing situation. As soon as the system has been running for long enough for us to make an objective assessment of its success as regards issues such as safety, we will publish that. It may take some years to get sufficient data, but I can assure my hon. Friend that the early signs are extremely encouraging. As far as I am aware there have been no safety concerns, and the easing in congestion resulting from hard shoulder running looks to be exactly in line with international experience where that has been tried before.

Nigel Evans: Surely one way of improving the network would be to ensure that highways departments have access to the resources that they need to carry out road safety improvements. When I asked the county council to carry out an improvement in my patch, on a roundabout on the A59 between Sabden and Clitheroe, I was told that it did not have the money, yet we have had fatalities and many injuries there. Would not it be better to get county councils, the police and the Treasury to talk together about preventing the Treasury from siphoning off the money from road speed cameras, and using it on road safety schemes that will save lives?

Stephen Ladyman: The hon. Gentleman needs to keep up. We announced last year that after this year the netting-off arrangements would end so that there is no linkage between cameras and revenue to safety partnerships. Next year, the money will go back to the local road safety partnership and can be spent not only on cameras but on other road safety measures. If the hon. Gentleman's local authority does not have sufficient money to do a piece of work that is its responsibility, I can only assume that that is down to the mismanagement of a Tory local authority.

Lynne Jones: The £1.2 million west midlands study mentioned by the Secretary of State concluded that the only way to reduce congestion was to introduce some form of road pricing. Does my hon. Friend share my disappointment that the leadership of Birmingham city council, like other local authorities in the west midlands, has knocked back the principle of road pricing and is still consulting on that matter rather than on the practicalities of introducing such a scheme? Does he agree that one way of improving—

Mr. Speaker: Order. One supplementary is fine.

Lynne Jones: rose—

Mr. Speaker: Order. That is fine.

Stephen Ladyman: I share my hon. Friend's enthusiasm for the potential benefits of road pricing. I can tell her that we have a good constructive relationship with west midlands local authorities, looking into how road pricing might work. One of the challenges in a complex conurbation such as the west midlands is that there are many local authorities with different political leaderships and different views on the right way forward. My right hon. Friend the Secretary of State and I have to overcome the challenge of getting them all working together, but we are fully determined to do it.

David Heath: How can we have confidence in the management of the trunk road system when the Minister told me from the Dispatch Box more than six months ago that he would write to me about the A303—which carries more traffic than most motorways, yet is not designed as such—and I have not heard a word from him since? We heard over the summer that the Sparkford to Ilchester improvements have been delayed until some future date, and that the sound reduction improvements that we were promised in 2004 are not in the programme. Why has the A303 been forgotten?

Stephen Ladyman: The A303 has not been forgotten.  [Interruption.] Perhaps the hon. Gentleman, who would normally claim to be actively involved in his local community and region, has not followed the process of regional funding allocation and prioritisation. It is one thing for Liberal Democrats to talk about devolution, but they clearly do not get involved in it.
	As for my promise to write to the hon. Gentleman, as soon as the decision is made—he knows that it is extremely complex, and involves a great deal of money—I shall write to him, and many others.

Rail Services

Natascha Engel: What account is taken of the population of the town served when determining the number of rail services which stop at any particular station.

Tom Harris: Population changes are among a range of factors that the Department routinely takes into account when assessing the demand for train services. Other factors include line and station capacity, the number of train services already using the line and the availability of alternative transport modes.

Natascha Engel: I welcome the Minister to the Dispatch Box, and I hope that he has a long and illustrious career. As he knows, Dronfield, the largest town in my constituency, has a population of some 25,000. Ten trains stop at Dronfield railway station every day. Let us compare that with Alfreton, a nearby town, which has a population a third the size of that of Dronfield but three times as many trains. Ninety-three trains a day stop in Long Eaton, which is far smaller than Dronfield. What is my hon. Friend doing to influence the current round of bids for the east midlands rail franchise to ensure that demographic changes in places such as Derbyshire are taken into account?

Tom Harris: I am grateful to my hon. Friend for her kind comments, and I pay tribute to her for her energetic campaign of work on behalf of her constituents on the subject of her question—especially the Dronfield station action group, whose members I was privileged to meet earlier this afternoon. My hon. Friend rightly points out that the east midlands franchise provides an opportunity to improve services at Dronfield. I can confirm that a new service between Nottingham and Leeds was included in the east midlands franchise document that the Department issued in June, and I am confident that it offers the genuine prospect of an improved service to Dronfield.

Richard Benyon: The Minister's predecessor will be welcome any time in Newbury, and will be stood many free drinks for his work in reversing the proposed cuts in the new timetable. The current Minister will have as warm a welcome if he does all he can to assist in retaining the late-night service from Paddington to Newbury, which is under threat. It operates from open platforms at Paddington and Reading, and there is no understanding at First Great Western of the value of the service. Will the Under-Secretary do all he can to help protect that vital service for late-night travellers?

Tom Harris: I shall be honoured to accept any free drinks that the hon. Gentleman wants to offer at the Strangers Bar, but he has probably been misinformed about cuts to services. The British railway is expanding at a greater rate than that in almost any other European country. If he wants to write to me about specific aspects of the service about which he is worried, I shall be more than happy to discuss them with him. However, there is a massive increase in the number of passenger journeys in the British rail network, with more than 1 billion passengers carried on it every year. Such a service has not been experienced since 1961.

Jim Cousins: Sunderland, a city of 300,000 people, was given a direct rail service to London. Great North Eastern Railway then had a hissy fit and has sought chapter 11 protection in the United States. Will my hon. Friend assure us that none of the other towns and cities that GNER serves will suffer any resultant harm, and that the Government will continue to get their full franchise agreement money from GNER?

Tom Harris: The House would not expect me to comment on what is a matter for the private company, Sea Containers, which owns the GNER service. The Sunderland to London service, which is planned to commence on 10 December this year, is with the Office of Rail Regulation, and we expect an announcement soon.

Chris Grayling: I add my congratulations to the Minister on his appointment. I am not sure that I hope he has a long and fruitful career, but I hope that he enjoys his time at the Department, and that there is a change of management before too long.
	Two weeks ago, the Department announced the award of the South West Trains franchise, and said that capacity on mainline and suburban services would increase by about 20 per cent. The Minister said:
	"Today's contract means that capacity will further increase and there will be more seats for many passengers on busy routes".
	When he said that, was he aware that South West Trains' plans require it to rip out about a quarter of the seats on its suburban trains? Was he also aware that more passengers will have to stand, and that its whole business plan is built around cramming more and more passengers into the same space on its trains?

Tom Harris: I am grateful to the hon. Gentleman for his comments.
	The new south-western franchise will be of major benefit to everyone travelling in the south-western area, including his constituents. Capacity on peak-time services in the south-western franchise will increase by 20 per cent., and I would have thought that he would welcome that. I would also expect him to welcome the fact that, unlike many previous franchises, Stagecoach Ltd has committed to giving the Government £2.1 billion over the length of it. He has a problem with private companies giving money to the Government instead of the other way round, which I find to be an odd state of affairs.

Chris Grayling: The Minister does not seem to understand the problem. It is not much of a deal for passengers who must stand on the way to work for 45 minutes on trains that will have fewer seats in future than today. Nor does he seem to understand the problems of the franchise system. This morning, the chief executive of GNER said that it might have to hand back its keys to its franchise. In other areas, fares are going up, car park charges are being increased and more and more passengers are being crammed on to the same trains. Does not he accept that the franchising system, as changed by this Government, is not working?

Tom Harris: I do not accept that. The south-western franchise represents an excellent deal for the passenger and the taxpayer. I do not accept the hon. Gentleman's analysis of the current system, and every time he opens his mouth on the matter, I have a sense of trepidation. First, he said that he regretted his Government's cack-handed privatisation of the rail service in 1994. Now he is saying that the franchising system is not sustainable. He also wants to decimate the rail service further by breaking up Network Rail and redrawing its responsibilities to be coterminous with the franchise areas. Under this Government, the British railway system is growing and taking more people on journeys. His proposals will not benefit, and certainly not expand, that railway system.

Rosemary McKenna: My hon. Friend will be aware of the announcement that the station in the village of Croy in my constituency is to become a major hub in central Scotland, connecting to the rest of the UK with a park-and-ride facility. Does he agree that that example could be replicated across the rest of the UK, improving rail transport while also reducing road transport?

Tom Harris: As a former employee of Strathclyde Passenger Transport, it gives me great pleasure to pay tribute to its work in Croy and to the efforts of the Labour-led Scottish Executive, who have been a partner in the project.

Daniel Kawczynski: The Minister will be pleased to know that Shrewsbury will finally receive its direct rail link to London—next year I hope—thanks to a private company, Renaissance Trains, providing the service from Wrexham to Marylebone. Will he agree to meet that company to help it to cross the t's and dot the i's?

Tom Harris: I am always available for crossing t's and dotting i's. The hon. Gentleman is correct to say that the proposed start date for the new service is 2007. The plan is that five trains will be used in each direction on that route.

Passenger Transport Authorities

Alan Whitehead: Whether he has plans to develop new passenger transport authorities.

Gillian Merron: We have no current plans to create further PTAs.

Alan Whitehead: My hon. Friend will be aware of the success of PTAs in co-ordinating bus services and integrating transport. When she undertakes the review of bus services and the extension of local authority powers in respect of their regulation, will she look at whether the use of PTAs could be extended to non-metropolitan areas, such as the Solent area in south Hampshire?

Gillian Merron: I am always happy to consider proposals from hon. Members, but I remind the House that local authorities have very mixed views about setting up new PTAs in their areas. Although having a single body can produce great benefits in terms of co-ordination, local authorities have to surrender some existing powers. I take this opportunity to pay tribute to the work being done in the area represented by my hon. Friend by the Solent Transport Partnership. It has greatly improved local transport for local people, for example through the introduction of the integrated travel card. Such improvements offer a good example to the rest of the country.

CONSTITUTIONAL AFFAIRS

The Minister of State was asked—

Freedom of Information

Andrew Turner: How many freedom of information complaints have been made to the Information Commissioner; and how many relate to Government Departments.

Vera Baird: Since the implementation of the Freedom of Information Act in January 2005, the Information Commissioner's office has received 4,292 cases, of which 30 per cent. have related to central Government Departments and Agencies.

Andrew Turner: I am grateful to the Minister for that answer. However, she gave the number of cases that the commissioner's office has received rather than the number of complaints, so perhaps she does not know how many complaints have been received. Does she expect there to be a reduction in the number of complaints, given that the Government propose to reduce the cost threshold, which will mean that fewer applications will be answered? When officials decide that Ministers may have something to hide and that they should push an application up to ministerial level, the cost of a Minister considering that application will be included in the cost threshold.

Vera Baird: The proposal is not quite as the hon. Gentleman describes it. When deciding whether the £600 threshold has been reached, officials will take into account the time taken to read and consider an application, rather than just the time taken to make a search. That is surely a matter of common sense. In that process, Ministers' time is priced at £25 an hour, just like everyone else's. That shows that the engagement of Ministers in the process is pretty cheap—much cheaper than the equivalent in my previous job used to be. The involvement of Ministers will not necessarily mean that the process will cost more. Ministers do not get involved only when a matter is controversial—for instance, a Minister might get involved because the question is about him or her personally. Moreover, good governance under section 36 requires that Ministers get involved from time to time, so I think that the hon. Gentleman is making a number of false links.

Andrew Gwynne: A real problem is the number of public services that fall outside the FOI provisions. What is my hon. Friend doing to ensure that non-commercial decisions made by publicly funded bodies that provide public services—such as Stockport's Sports Trust, for example—fall within the remit of the Act?

Vera Baird: My hon. Friend raises an important point. The Constitutional Affairs Committee has said that the FOI Act has been a significant success so far, and we agree. It has made available to the public thousands of pieces of information from more than 100,000 public bodies, but that does not mean that that is as far as we need to go.

Alan Beith: The most worrying feature of the Government's response to the Constitutional Affairs Committee's report is the proposal that Departments should be able to aggregate requests from a single source. That provision would be wide open to abuse by Departments that do not want important public interest issues raised and made subject to FOI requests. Will aggregation decisions be subject to appeal to the Information Commissioner?

Vera Baird: The short answer to that is yes. The appellate process will remain in place, and every time there is a refusal, there will be an appeal all the way up from the internal review to the commissioner and to the tribunal. The right hon. Gentleman will know, however, that there is already a power to aggregate similar requests from the same inquirer—the BBC has been extensively referred to in the publicity, for example. That is a power, however, not a compulsion; sometimes it is used, and sometimes it is not. What is being proposed is an extension—we are going to sound out where the extensions should take place—to enable the aggregation of non-similar requests. Serious serial users account for about 14 per cent. of requests, and they are very expensive. In particular, they take up a lot of senior officials' time. I have said that we price their time out at £25 an hour, but it costs us a good deal more than that. So this proposal is an attempt to strike a balance between an appropriate level of information being delivered and public service delivery, which is what our officials are mostly about.

Oliver Heald: But is not the problem that a lot of the people whose requests are likely to be aggregated are the people whose job is to hold the Government to account? That includes political parties, the media and particular newspapers. The decision to allow aggregation across a range of different questions will give rise to particular risks. Furthermore, it was announced today that the Treasury will continue to refuse to release information about the true cost of identity cards under the Freedom of Information Act. It has been ordered to provide that information but, no, it is going to appeal. How does the Minister square that Government attitude with the Labour party's pledge in 1996 to end "scandals, sleaze, patronage, secrecy" and to
	"stop unnecessary secretiveness in government"?
	Is not this just another example of good intentions but very poor delivery?

Vera Baird: I cannot help noting that, during the Tories' 18 years in government, they chose not to introduce a freedom of information Act. They preferred to cleave to secrecy during all that time. There was not much evidence of letting sunshine in to win the day there, was there? Or of any other chinks of light being shed on the secrecy of the hon. Gentleman's former colleagues.
	The Treasury must be asked about its own approach, but it is entitled, like everyone else, to go through the appellate procedure, and that is exactly what it is going to do. If we wanted to make a serious attempt to curtail or limit these requests, the way to do it would be to levy a flat-rate charge. That would reduce by about 44 per cent. the time spent processing the requests, but we have expressly chosen not even to consult on that option. The impact of our proposal will be to reduce the most expensive requests while preserving the right of the vast majority of people to get absolutely free information. The hon. Gentleman almost suggests that the way in which we are proposing to go forward—

Mr. Speaker: Order. May I suggest to the hon. and learned Lady that it might be appropriate to send some information to the hon. Gentleman via a letter? Her answer is very long.

Gwyneth Dunwoody: I have listened carefully to what my hon. and learned Friend has said. Will she tell me how many Members of Parliament have used the Freedom of Information Act? Some of us find it rather disheartening that, when we ask for information on sensitive subjects from the Department of Health, for example, we are given so little. In those cases, we have to prepare freedom of information applications to get the information that we need.

Vera Baird: I do not have the information on the number of Members of Parliament making such applications, but if my hon. Friend wants me to get it for her, of course I will do so. She has raised the analogy of parliamentary questions, and it is interesting to note that there is no guidance that says that the time used for reading and consulting is not aggregated in when considering the upper time limit for parliamentary questions. It is entirely sensible that the Freedom of Information Act requests should be aggregated.

Simon Hughes: Does not the Government's response to the recommendation of the Constitutional Affairs Committee show that, in office, they are going cold on the commitments that they made when they were in opposition? Is not the reality that, if they put up the charges and give regular, serious users fewer opportunities to use the Act, they will reduce the total number of people using it, and reduce the ability of the most investigative—and potentially the most difficult—customers to get the information that the Government are least keen to divulge?

Vera Baird: Once again, the hon. Gentleman makes a false elision. The aggregate users do not necessarily produce the embarrassing facts. They embark on extremely wide, sweeping inquiries that take hours and hours—indeed, weeks sometimes. Of course, there is a duty on every Department that refuses a request for information under the freedom of information legislation to try to advise the inquirer how better they can bring their inquiry within the terms of the Act. There is plenty of scope for applications that are refused on the new basis to be resubmitted under a different name 60 days later. That will not deter the rational, quite honestly.

Consultants

Keith Vaz: What mechanisms are in place to ensure value for money is obtained when consultants are employed by her Department.

Vera Baird: The use of consultants is governed by policy and practice laid down in guidance to managers. Mechanisms include a requirement to assess the need for consultants, taking account of skills and experience within the Department, financial approval, development of clear specifications in terms of outcomes and key milestones, and a responsibility on managers to manage performance against the contract.

Keith Vaz: The Minister will be aware that, on 4 May, the Minister of State said in reply to a parliamentary question that I tabled that she could not give me information about what the consultants were used to accomplish, because of the cost involved. Bearing in mind the fact that the Department spent £700,000 on consultants in 1997, and that last year it spent more than £10 million on them, is it not time that Ministers got a grip on the issue and told Parliament and the taxpayer what the consultants are being used to accomplish—especially the gentleman who was paid £2,100 for each day of work?  [ Interruption. ]

Vera Baird: My right hon. and learned Friend the Minister of State says that the person must have been a barrister, but it was not me. I know that my right hon. Friend the Member for Leicester, East (Keith Vaz) has written a piece of work on the subject, which I trust, as it will soon become a Hollywood movie. Managers keep records. The Department has changed significantly in past years. For example, there has been the merger of magistrates courts to create Her Majesty's Courts Service. The Department has grown bigger and it has to integrate. It is reforming all the time. For instance, we have distanced ourselves from involvement in the appointment of Queen's counsel, which was successfully accomplished under the new system yesterday. We have distanced ourselves from the appointment of judges, too. We have started to engage in the subject of social exclusion, and have taken a number of excellent measures that I know my right hon. Friend supports, such as encouraging the Judicial Appointments Commission to embark on the recruitment of a more diverse range of people to the judiciary. Those changes have been supported by consultants, and that is a perfectly reasonable use of their services.
	I understand that the gentleman whose cost per day was referred to had particularly specialist skills— [Interruption.] I certainly hope that he did. He was apparently dealing with the way in which the courts handle the £5 billion of public money that they must invest while it is in their custody. That was a high-risk issue for him to consider, and I hope that he did that well.

Philip Hollobone: According to press reports, the Department spent almost £750,000 last year on life-coaching programmes. What did those programmes involve, and were they value for money?

Vera Baird: I am sorry to say that I did not take part in one of the programmes myself—I am gratified to say that there was no need. They were for officials. I shall write to the hon. Gentleman with as much detail as I can summon, if he has a genuine curiosity about the matter.

Family Cases

Anne McIntosh: How many family cases were brought to court in each of the last five years; and if she will make a statement.

Harriet Harman: There were 400,000 applications to the family court in 2001; 408,000 in 2002; 412,000 in 2003; 407,000 in 2004; and 381,000 in 2005.

Anne McIntosh: I am most grateful to the right hon. and learned Lady for her reply. Can she tell the House a little about the role of mediation in family cases brought before the court in trying to keep the parties together in the event of a marriage breakdown? What role does she believe that the family court should play in the eventual remodelling of the Child Support Agency?

Harriet Harman: Two roles are envisaged for mediation. One is for couples who want to stay together and want help to maintain their relationship. The other is for couples whose relationship is over, but for whom mediation is important so that issues relating to finances and, above all, the care of the children can be agreed on instead of battled out in court. The Government are working to ensure that there is a great deal more mediation to avoid unnecessary court disputes. For example, 400 couples got publicly funded mediation in 1997 and the figure is now 14,000. It is still a small number. Anything that can be done by mediation rather than slugging it out in court is much better for everyone involved, especially the children.
	I do not think that there is particularly a role for mediation and the family courts in relation to the Child Support Agency, so I am afraid that I cannot help the hon. Lady on that one.

Ian Lucas: Will my right hon. and learned Friend confirm that the Government's proposals to introduce fixed fees in family law cases are intended to be cost-neutral?

Harriet Harman: I thank my hon. Friend for his question. The answer is yes. I work closely with the Under-Secretary of State for Constitutional Affairs, my hon. and learned Friend the Member for Redcar (Vera Baird), on the question of public funding for legal services in the family courts. We want to have the very best family court services, and part of that is high-quality, properly trained legal representatives. Obviously, we do not want cases to get to court unless they absolutely have to, but when they do, we must make sure that the public funding is there and that the supply of solicitors and barristers to do that important work is available.

Jonathan Djanogly: But is it not the case that hundreds of family lawyers across the country maintain that the new Government fee structure for family lawyers is uneconomic and unsustainable? Is it not the case that our network of high street family solicitors is rapidly dissolving? What do the Government intend to do about it?

Harriet Harman: My hon. and learned Friend the Under-Secretary is discussing the proposed changes that arise from the Carter review. She is in discussion with those providing important family services in towns and high streets and is well aware of the points that the hon. Gentleman makes. We are concerned to ensure that the supply of solicitors and barristers is there, but above all we want to make sure that mediation is available as well so that cases do not have to go to court unless it is absolutely necessary.

David Lepper: I welcome what my right hon. and learned Friend has just said, but when I met members of the Sussex Law Society some two weeks ago many of them expressed grave concern about the continuing availability of representation for vulnerable people in family law cases. Will she give due consideration to the representations that I have forwarded to her Department on behalf of members of the Sussex Law Society?

Harriet Harman: Absolutely. My hon. Friend's points are well made. Perhaps it will be possible for him to arrange a discussion with his local law society and my hon. and learned Friend the Under-Secretary, who has departmental responsibility for the Carter review.
	We are absolutely determined to ensure that we have the right sort of legal services in the family justice system, and we want to work with the profession to ensure that that is the case.

Oxfordshire Coroner

Norman Baker: if she will make a statement on the meeting between the Oxfordshire coroner and her departmental officials in August 2003.

Harriet Harman: Following the announcement of the Hutton inquiry, the Lord Chancellor indicated that he was minded to invoke powers to ask the coroner to adjourn the inquest into the death of Dr. David Kelly, pending the outcome of the inquiry, unless there was an exceptional reason why he should not do so. The coroner met officials from the Department for Constitutional Affairs on 11 August to discuss how he might briefly resume the inquest to admit further evidence of the cause of death so that the cause of death could be accurately recorded by the registrar, and that then happened.

Norman Baker: Why was that meeting taking place when the coroner, having been replaced by Lord Hutton, was officially off the job? How could he legally resume an inquest when Lord Hutton had been given the powers to deal with the matter in place of the coroner? Is not the Minister concerned about the backlog of more than 100 inquests into the deaths of British military personnel that has built up under the coroner, dating back to 2003? Does she share my disquiet about the way in which this particular coroner is undertaking his duties?

Harriet Harman: We have been very concerned about unacceptable delays in the inquests into the deaths of servicemen and women in Iraq. I am working with the coroner, together with additional coroners who have joined him, to help with the backlog. I would like to thank him and also Selina Lynch, Andrew Walker and Sir Richard Curtis, who are determined to ensure that bereaved relatives get questions about the deaths of their loved ones promptly answered. We are getting on with ensuring that the backlog is dealt with as it should be. As I said, the delays are unacceptable.
	As to the meeting with Department for Constitutional Affairs officials about the death of Dr. David Kelly, I shall explain what happened. When the Hutton inquiry was announced, section 17A of the Coroners Act 1988 became relevant. It allows the Lord Chancellor to tell the coroner that there will be a public inquiry and if, in his view, it covers the same ground as the inquest, what happens is that, unless there are exceptional reasons to the contrary, the coroner has a duty to adjourn the inquest until after the inquiry has concluded. The meeting with officials came about because, although the inquest was opened by the coroner with initial information about the cause of death, further information—after the Hutton inquiry had been announced, but before it had got under way—came in from Home Office pathologists, including a toxicology report. The coroner wanted to be sure that that information was formally admitted so that it could be passed to the registrar in order to ensure that details of the death were properly recorded. I was not working in the Department at the time, but I have discussed the matter with officials and the position is as I have described it. However, if the hon. Gentleman wants further information, I would be happy to write to him.

Electoral Arrangements

Barbara Keeley: What assessment she has made of the impact of requiring voters to sign for receipt of their ballot paper.

Bridget Prentice: Where it has been tested in election pilots, the impact has generally been positive. The requirement has not resulted in long queues in polling stations.

Barbara Keeley: Salford city council has a good record in electoral administration, but it has some concerns. Members of the council wanted me to ask the Minister about paragraph 75 of Schedule 1 to the Electoral Administration Act 2006. Does she believe that the requirement to sign for ballot papers could lead to queues building up in polling stations, which might deter voters? Secondly, as comprehensive checks cannot be made on individual signatures, is there still merit in having people sign for a ballot paper?

Bridget Prentice: First, I congratulate my hon. Friend and her constituents on having the highest level of registration—92 per cent.—in the Salford local authority area. I hope that other constituencies around the country will attempt to reach that same level of registration. As to signing at polling stations, there was no indication in the pilots that queues were forming and I do not believe that they are likely to result in the future. However, there is a requirement for returning officers to be aware of the problem and to make plans to deal with a heavier turnout, perhaps in a general election.
	As for keeping the signatures, while people will sign at the polling station, if there is any question of fraud or impersonation thereafter, the police carrying out the investigation will be able not just to look at the signature used at the polling station but to seek to verify other signatures such as the one on a credit card. They will also be able to use specialist signature checking expertise to support that task. I am therefore confident that the system now in place will provide greater security to the electoral process and allow people to feel confident about the integrity of the system. At the same time, the system will ensure that registration reaches the level that it should. It will help to ensure that the 3.5 million people who are currently not on the register soon will be, so that their voices can also be heard.

Points of Order

David Davis: On a point of order, Mr. Speaker. You will have read in the newspapers this morning that two terrorist suspects restrained under the control order legislation have absconded—one of them some months ago. You will remember that the control order legislation was only passed, after the longest ever sitting of the House of Lords, when the Home Secretary gave an undertaking to report back on the operation and effectiveness of the legislation. Accordingly, quarterly statements are made to the House.
	On 11 September, the statement from the Minister for Policing, Security and Community Safety said:
	"There are 15 control orders currently in force, six of which are in respect of British nationals."—[ Official Report, 11 September 2006; Vol. 449, c. 122WS.]
	It then outlined details of applications to modify those orders. There was no mention of a breach of orders, an escapee or a risk to the public. That statement may be true, but it is not the whole truth. Has the Home Secretary indicated to you, Mr. Speaker, whether he intends to come to the House to explain why such information was withheld?

Mr. Speaker: Order. I am going to stop the right hon. Gentleman, because he put an urgent question before me, and for reasons that I do not have to give to the House, I refused that urgent question. But it appears to me that he is pursuing that urgent question on the Floor of the House. He is drawing the occupant of the Chair into this matter. He can table parliamentary questions and seek answers to these matters. I will say no more on this.

Douglas Hogg: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. I am saying no more on the matter. I have given a ruling.

Douglas Hogg: It is a slightly different point.

Mr. Speaker: It needs to be a bit more than slightly different.

Douglas Hogg: It is entirely different.

Mr. Speaker: It has gone from "slightly" to "entirely". I will hear it if it is entirely different.

Douglas Hogg: You have just indicated, Mr. Speaker, that an urgent question was requested. You will know that I also requested an urgent question. My understanding was—I would appreciate your clarification on this—that Members who request urgent questions should not disclose that fact in the House. It may be that you have just changed that ruling, in which case I would very much like to know.

Mr. Speaker: I have not changed the rule. If an hon. Member puts an urgent question before me and pursues the same question on a point of order, I am entitled to tell the House that the urgent question was refused. It would defy all logic to say otherwise. I will not allow hon. Members, even Front Benchers, to try to push a point of order when they tried to get an urgent question. By the way, as Speaker, I am always very generous about urgent questions, so when I refuse them, I have good reason to do so.

Douglas Hogg: Further to that point of order, Mr. Speaker. I appreciate that and I am not criticising. I simply want to know whether Members like me who request urgent questions are entitled to say that fact in the House on appropriate occasions.

Mr. Speaker: The right hon. and learned Gentleman is not supposed to say so in the House. But of course, it is more than an open secret when an application for an urgent question goes before me in the Speaker's Office. Of course, it should not be mentioned on the Floor of the House, except—I give this ruling—where a right hon. or hon. Member tries to pursue something on a point of order that has been refused only a few hours earlier. In my view, that was the case here.

Gambling Act 2005 (Amendment)

Jim Cunningham: I beg to move,
	That leave be given to bring in a Bill to amend the Gambling Act 2005 to allow for increased provision of casinos; and for connected purposes.
	The Bill's objectives are to amend the Gambling Act 2005 to allow a minimum of eight regional casinos, with the onus on the regeneration of key cities, as initially proposed by the Government. After the Act's consideration in Committee, the Government introduced new clauses to set limits on the number of casinos. At that point, the number of regional casinos was set at eight, but as the Government faced opposition, that number was reduced to one. As a result, the national potential for jobs and investment will not be fully achieved.
	The failure to recognise that loss of potential investment could result in the loss of about 22,000 possible jobs and an additional 17,000 support jobs. In total, the opportunity for 40,000 new jobs could have been lost, not to mention reductions in investment. The failure to support all the main regeneration schemes will have a negative effect and may put back regeneration programmes by about a decade. In total, the UK could lose the potential for more than £5 billion in investment, particularly in deprived areas.
	In terms of protective legislation, the Secretary of State has addressed concerns regarding habitual gambling, stating that she does not think that casinos would increase problem gambling, and that she would prefer to close them if they did. In advance of the implementation of the relevant provisions of the Gambling Act 2005, and every two or three years thereafter, the Government intend to fund a national study that will measure the impact that any new casinos have on the surrounding areas and the issue of problem gambling. In addition, provision has been made in the Act to establish the Responsibility in Gambling Trust. The trust has been established on a voluntary basis to provide funding to support problem gamblers and their dependants.
	The casino advisory panel's criteria, as laid down by the Secretary of State, were to ensure that location satisfies need, for there to be the best possible test of social impact to include areas of need and regeneration, for consideration to be given to areas that are likely to benefit in those terms from a new casino, and to ensure that the areas selected were willing to license a new casino. The panel condensed the applications down to a shortlist of eight. On the shortlist were Blackpool, Wembley, Cardiff, Glasgow, Manchester, Newcastle and Sheffield. I believe that the Government should increase the numbers of casinos, as the decision that has been taken is not based on the best interests of areas that are in dire need.
	Local authorities should not be fighting each other over restricted resources. Rather, the Government should allow a fair system of opportunity, and allow more than one area of need to benefit from regeneration, investment and jobs. The Government have hinted that legislation could be revisited, and that the permissible number of regional casino licences could be increased, given sufficient support from local authorities, MPs and the public. It should be remembered that the Government expect that a regional casino will be a major development, offering clear potential for regeneration, and providing not only a range of gambling activities, but also perhaps including hotel accommodation, conference facilities, restaurants, areas for live entertainment and other leisure attractions.
	There is already a casino in Coventry that would meet the criteria, should the Government be willing to increase the numbers. In contrast to many other proposals, Coventry's submission was based on an extensive independent assessment. Therefore, I propose that an amendment be made to the Act, increasing the number of regional casinos from one to a minimum of eight.

Julie Kirkbride: I rise to speak against the desire of the hon. Member for Coventry, South (Mr. Cunningham) for there to be an amendment to this gambling legislation. I do so despite the fact that I have a great deal of respect for the hon. Gentleman, who is a neighbour and colleague in the west midlands, as I believe that he is profoundly wrong to think that his constituency would benefit from such a development. If I may say so to the hon. Gentleman, I also think that he is being used somewhat as a stalking horse by his Government, to test opinion in the House on whether there is an appetite to change what was set out by the Gambling Act 2005. The simple fact is that it is not necessary to have this proposed legislation, because the relevant provisions in the Act can be changed by statutory instrument, subject to a vote by all Members.
	It might be helpful if I remind the House about how we got the Gambling Act 2005. When the Government introduced the original Bill, they intended to have a free-for-all on the development of casinos across the country, subject to demand as the operators saw that. As time passed, and as Members spoke out, along with other sections of society—including the  Daily Mail, the Minister for Sport might be fond of remembering—it became clear that it would not be acceptable to have a major extension of such Las Vegas-style casinos across the United Kingdom. Given that a general election was imminent, the Government agreed to the idea that there should be only one regional casino, eight large casinos and eight small casinos, and that that would be the way that the measures would be proceeded with, unless the House decided otherwise through a statutory instrument such as that which I mentioned.
	The Minister for Sport, who is in the Chamber, might remember that my hon. Friend the Member for East Devon (Mr. Swire) asked him about the matter during Question Time just a week or so ago. The Minister said:
	"The Conservatives decided to come back with the proposal of one regional casino, which we accepted because we wanted to get the Bill on to the statute book in order to protect the vulnerable in our society. That is where it now stops—at one regional casino—unless the hon. Gentleman says to the Government that the Conservatives want to change the proposal."—[ Official Report, 9 October 2006; Vol. 450, c. 11.]
	I applaud the Minister's remark to my hon. Friend, but although that represents the public face of the Government, their private face appears to be somewhat different. I suspect that the Secretary of State is much keener on a bigger free-for-all in casino development than the Minister is, at least in public. Following a meeting that took place between the Secretary of State and Coventry Members to petition her about a casino in Coventry, the hon. Member for Coventry, North-West (Mr. Robinson) wrote on his website:
	"It was a very positive meeting. She invited us to submit early day motions and a ten-minute bill asking for Coventry to be included on the shortlist, and also to get the Government to increase the number of super casino licences from one to eight."
	I, and other Conservative Members, reject wholesale the private view that the Government have expressed to Labour Members.
	Of course, the Government would like the number of such casinos to be increased from one to eight, because they face the political problem of who the one licence should be given to. Technically, that should be a matter for the casino advisory panel, but we all know that Ministers have views on the issue.

Jim Cunningham: Will the hon. Lady give way?

Mr. Speaker: Order. There are no interventions during speeches on a ten-minute Bill.

Julie Kirkbride: I am grateful for your guidance, Mr. Speaker.
	We found out that the Government had views on who they would like the licence to be awarded to when we heard about the Deputy Prime Minister's visit to a ranch in Colorado owned by Mr. Philip Anschutz, who also happens to own the dome. Mr. Anschutz is determined to get a regional casino licence for the dome, but were such a licence to be granted, the Government would face the huge embarrassment of having to tell everyone else in the country that the development attached to that licence—such as it is—had gone to the most prosperous part of the United Kingdom, rather than another area.
	I hope that the casino advisory panel—and the Government, for that matter—will give the one licence available to Blackpool. That would allow Blackpool to revive its tourism and enjoy the regeneration attached to the proposals that was described by the hon. Member for Coventry, South. The best case that has been put forward is for such a development to be in the Blackpool area.
	I should warn the people of the Blackpool area that such a casino would involve significant moral hazards. One of the arguments that is often cited about the development of casinos is that we have insufficient exciting opportunities for betting and gaming in the United Kingdom today. I profoundly refute such a suggestion because there are ample opportunities for betting. We can bet at the races, in betting shops and on the internet. We can bet on national savings bonds, if we want to buy some. We can bet on the lottery. We can win more money than we ever thought that we would have, and lose more money than we would hope to do, by participating in activities that are available in the United Kingdom today. We do not need Las Vegas-style betting casinos, which offer a profoundly different form of gambling and are almost certainly bound to lead to a big increase in addictive gambling in the United Kingdom.
	Hon. Members who have not seen such casinos should visit one for themselves. They are made up of huge complexes in which sheds upon sheds are filled with gaming machines. People put their coins in those machines and pull the levers in the hope that they will win the jackpot prize.
	The machines are deliberately designed to encourage the player to believe that one more pull of the lever will win them the jackpot, but the owners of the machines have programmed them to pay out exactly the amount that the operator is prepared to lose. No gaming is involved; the machines are simply for money-making.
	Gaming machines pose a significant moral hazard for our fellow countrymen, as was shown in the recent PricewaterhouseCoopers report, commissioned by Greenwich council to assess the implications of such developments in the Greenwich area. The report was leaked to the  Evening Standard but it has not yet been published, because of its explosive contents. We are led to believe, however, that the report notes that groups such as young people, the poorly educated, pensioners and people who play on slot machines are at high risk and more likely to become addicts. I cannot believe that Labour Members are keen to see that happen in their constituencies.
	The social costs of such developments include bankruptcy, suicide, illness and crime, which can involve money acquired from family, friends and employers under false pretences. Those are the moral hazards of the casino industry and the Government were right to proceed on the basis of a pilot project, by offering only one regional licence. It is right and proper that we assess the impact of that project before we proceed with a roll-out across the United Kingdom, whether it involves one, eight or 100 new casinos. We want to know about the implications before we go ahead with such a worrying social development, so I oppose the Bill.

Question put, pursuant to Standing Order No. 23 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
	 The House divided: Ayes 55, Noes 240.

Question accordingly negatived.

Companies Bill [ Lords] (Programme) (No. 3)

Margaret Hodge: I beg to move,
	That the Order of 6th June 2006 (Company Law Reform Bill  [Lords] (Programme)) be varied as follows:
	1. Paragraphs 4 and 5 of the Order shall be omitted.
	2. Proceedings on consideration and Third Reading shall be completed in three days.
	3. Proceedings on consideration shall be taken on each of those days as shown in the first column of the Table and in the order so shown.
	4. Each part of those proceedings shall (so far as not previously concluded) be brought to a conclusion at the time specified in relation to it in the second column of the Table.
	5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at 6.00 p.m. on the third day.
	
		
			 FIRST DAY 
			  Proceedings  Time for conclusion of proceedings 
			 New Clauses relating to Chapter 2 of Part 10, Amendments relating to Chapter 2 of Part 10 7.00 p.m. 
			 New Clauses relating to Chapter 1 and Chapters 3 to 9 of Part 10, Amendments relating to Chapter 1 and Chapters 3 to 9 of Part 10. 8.30 p.m. 
			 New Clauses relating to Part 11, Amendments relating to Part 11. 10.00 p.m. 
		
	
	
		
			 SECOND DAY 
			  Proceedings  Time for conclusion of proceedings 
			 New Clauses relating to Chapter 5 of Part 16, Amendments relating to Chapter 5 of Part 16, new Clauses relating to Chapters 1 to 4 and 6 to 12 of Part 16, Amendments relating to Chapters 1 to 4 and 6 to 12 of Part 16. 3.00 p.m. 
			 New Clauses relating to Part 8, Amendments relating to Part 8, new Clauses relating to Part 12, Amendments relating to Part 12, new Clauses relating to Part 13, Amendments relating to Part 13, new Clauses relating to Part 4, Amendments relating to Part 4, new Clauses relating to Part 5, Amendments relating to Part 5. 5.30 p.m. 
			 New Clauses relating to Part 15, Amendments relating to Part 15, new Clauses relating to Part 14, Amendments relating to Part 14. 7.00 p.m. 
		
	
	
		
			 THIRD DAY 
			  Proceedings  Time for conclusion of proceedings 
			 New Clauses relating to Part 44, Amendments relating to Part 44, Amendments relating to Clauses 521 to 523, new Clauses relating to Part 17, Amendments relating to Clauses 483 to 520 and 524 to 553, remaining new Clauses, remaining amendments to Clauses, new Schedules, amendments to Schedules, remaining proceedings on consideration. 4.00 p.m. 
		
	
	The motion increases the time allowed on Report and Third Reading from one day to three days. It also sets out an order of consideration and a time for conclusion of proceedings on various parts, which has been discussed through the usual channels to assist us in making the best use of the time. This protects time for Members to debate the areas regarded as most important, and allows time for scrutiny of other areas of the Bill.
	We recognise that the Bill is long and complex, but there has been a high degree of collaboration with interested parties. The Bill has had the benefit of detailed scrutiny in another place and of 11 days in Committee. There is a strong consensus on a great deal of it.

Edward Garnier: Before the Minister concludes her remarks, will she confirm that the Government are introducing 1,000 new amendments to the Bill at this late stage?

Margaret Hodge: No, we are not introducing 1,000 new amendments. [Hon. Members: "How many?"] We are introducing six hundred and—[Hon. Members: "The Minister does not know."] It is not a matter of not knowing. It is a matter of looking at what those amendments seek to do.
	If Opposition Members wish to spend the valuable time that we have to scrutinise the Bill on a programme motion, so be it. I draw their attention to the fact that the longer we spend on the programme motion, the less time we have to discuss the meat of the Bill, which people outside would expect us to do. We are attempting to get the framework of company law right for the next generation. On that basis, and in the hope that we can save time on this part of the proceedings, I commend the programme motion to the House.

Alan Duncan: The House has just heard a highly inadequate justification for a programme motion that curtails debate on a massive piece of legislation. We are about to move on to consideration of the largest Bill ever to come before Parliament. I believe I am right in saying that this is the biggest Bill in parliamentary history. Indeed, some people have estimated that if all the documents relating to the Bill, its amendments, its explanatory notes and its reprinted papers were put in a pile, the pile would be even taller than I am, and perhaps even taller than my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski).
	The Bill has been eight years in preparation and has undergone significant changes already during its parliamentary study, before we come to consider 100 proposed new clauses and—perhaps the Minister can remember this figure—836 amendments, not to mention three new schedules. The vast majority of these are being proposed by the Government.
	Despite the eight years of preparation, and the fact that the parliamentary Session began back in May last year, this enormous Bill did not receive a Second Reading in another place until 11 January this year. Unsurprisingly, it took their lordships nearly six months to complete their consideration of it. They did that in a thorough and expert way and did their best to consider the Bill, as Parliament should, clause by clause, line by line and argument by argument. The Bill received its Second Reading on the third sitting day after the House received it from another place and duly proceeded to Committee. The Bill, which was already enormous when it left another place, was then made into a parliamentary leviathan by the Government's late but none the less welcome acceptance of the argument that it should be a consolidation measure and should replace the whole of the Companies Act 1985. The Opposition welcomed that decision, but we consistently urged the Government to enable us to do our duty as legislators on the detail of the Bill in Committee, and asked them to take the summer recess as additional time to get the generally uncontentious consolidation measures right and allow the Committee stage to extend into October.

Douglas Hogg: My hon. Friend has made it plain that the Opposition will be perfectly willing to assist the Government if they give us sufficient time. Does he agree that a carry-over motion might be appropriate, as in the case of the Corporate Manslaughter and Corporate Homicide Bill of last week?

Alan Duncan: That option is definitely available to the House, but I doubt whether I will persuade the Minister to entertain it, because instead the Government insisted on the Committee stage finishing in July, and Standing Committee D was not able to examine any of the consolidation measures that were passed without debate at the end of the Committee stage, as the programme motion required.
	As a consequence, we estimate that, during the next three days, the House is being invited to consider about 200 amendments to amendments that the Committee was not able to consider in July, but which have since turned out to be defective in some way. Those amendments to amendments, together with the hundreds of other new amendments and 88 new clauses, were tabled only last week. That has inevitably placed the Opposition Front-Bench spokesmen in some difficulties, even with the assistance of their advisers— and even with the best will in the world, it is simply beyond the capacity of any Back Bencher to have any sensible appreciation of the scale of what is being attempted.

Douglas Hogg: I am sorry to intrude on my hon. Friend again, but he has spoken of the problems experienced by his advisers and himself. Would he also confirm that one of the consequences of so many amendments being tabled last week is that the outside interest groups do not have an adequate opportunity to make representations to the House?

Alan Duncan: My right hon. and learned Friend is absolutely right. Perhaps I can just pay credit to those on the Opposition Front Bench, particularly my hon. Friend the Member for Huntingdon (Mr. Djanogly), and those who have slaved away with him for the best part of a year on the Bill. No sooner have they climbed the mountain and reached the summit than the Minister gives us yet another mountain to climb. Unbelievably, a further 24 new amendments have been tabled only today. Not only are some of these politically sensitive, but we did not even have so much as a courtesy call from the Government to say that they had been tabled.
	In trying to put some order around the vast array of amendments that the House is being invited to consider, you, Mr. Speaker, have identified nine separate debates for today, 12 separate debates for Wednesday, and under the programme motion presented by the Government, 31 debates on Thursday. Proceedings on Report on Thursday will be further curtailed by the weekly business statement and by the Third Reading debate, which I understand is due to commence at 4 o'clock. That means that each subject identified by you under the rules of the House, let alone individual amendments, will have less than seven minutes for the Government to explain the case for their amendments, for the Opposition then to raise their concerns and for the Government to reply, let alone leaving any time at all for Back Benchers to make a contribution—and that is only if there are no Divisions, which would eat into the time available.
	There is simply no way that the House has been or will be able to discharge its duty to exercise proper scrutiny over this enormous piece of legislation. We contend that the way in which the Government have managed and programmed the Bill during its progress through the House has further undermined the reputation of the House of Commons in its role as scrutineer of legislation.

Patrick Hall: Will the hon. Gentleman give way?

Alan Duncan: No.
	On the basis of the evidence, we ask the House to reject the programme motion and make it clear that the Bill's management has been highly unsatisfactory, to request the Government to learn from the experience of the Bill, and to invite them to provide a better opportunity for the House to undertake its primary responsibility as legislator.

David Howarth: I sympathise with what the hon. Member for Rutland and Melton (Mr. Duncan) has just said. The real problem is not just the amount of time allowed on Report, given all the new amendments and new clauses, but more importantly, the timing of this stage of the Bill. As the hon. Gentleman said, Opposition Members have had only a short time to digest, understand and consider the various late amendments.
	However, most of the problems go back to a decision, which unfortunately seemed to have had universal consent, at least in all parts of the other place, to bring into the Bill's scope a massive consolidation exercise, including hundreds of new clauses from existing company law. This Bill was originally called the Company Law Reform Bill, and its intention was to reform parts of company law. It is now called the Companies Bill, thanks to an interesting vote in Committee, which the Government managed to lose—technically it was a free vote on their side. The Bill is now a general Companies Bill. It tries to consolidate the whole of the existing law, and it is that specific decision which has led to the various difficulties.
	The Government have been courteous and helpful to Liberal Democrat Members in making sure that there is enough room to debate the topics that we want to debate. Given how much is going on in the Bill, however, the fundamental problem is that there is not enough time for debate, because at this time of year there is not enough time to allow additional days for discussion. We are in a very difficult position, which was entirely foreseeable when all sides decided to change the Bill from a reform Bill into a consolidation Bill. As it stands, the programme motion is not adequate.

Austin Mitchell: I must preface my remarks by saying that I will, of course, vote with the Government on the programme motion. Having been absent from so many votes owing to illness, I want to burnish my record of loyalty and show just how grovelling and subservient I can be.
	This is a fairly shocking way to proceed, because we do not have time adequately to consider the Bill and the amendments. The Bill is based on a series of concessions to the vested interests in the field, which is the antithesis of what we should be doing. We should learn from America, where running a company has become a matter of engaging in financial manipulation to enhance the share price, which enhances the income of the people at the top through share options and pay schemes. Those dodges are being used both here and in the United States, and such practices led to the collapse of Enron and many prosecutions by the Securities and Exchange Commission, which is now, as they say in the United States, "seeing the perps walk". We should be countering those practices, which brought about the collapse of huge American companies and which are all practised here. We should also combat the trend towards excessive rewards, and collusion between auditors and people who run companies to enhance profits, share prices and returns to shareholders and directors.

Mr. Speaker: Order. The hon. Gentleman is putting a case for or against the Bill—I do not know which—but we are concentrating on the programme motion.

Austin Mitchell: You are, of course, right, Mr. Speaker. I am expressing my pent-up feelings, which would have come out earlier.
	The Government have clearly claimed their prerogative to amend the Bill, because they have tabled more than 800 afterthoughts. If the Government are rethinking at this stage, it indicates that the thinking process at an earlier stage was not satisfactory: we are effectively dealing with a new Bill. The strongest critics of the Bill were not members of the Standing Committee, so they were unable to table amendments in Committee. The Bill has not been given the intense scrutiny that it needs.
	The Bill is effectively a new Bill, because there are so many amendments. My head bursts when I read through the amendments. Some hon. Members are accountants and auditors, and they cluck appreciatively when they read such amendments, but my head is strained by trying to digest them. If I were to read out the amendments, it would take three days. There is just not time for us to deal with all the inherent complexities and all the changes that need to be made from any point of view that is either critical of the way in which companies are run or deferential to the vested interests that deal with those companies.
	We need more time if we are to produce a Bill that will endure. After all, the Government have had nine years in which to introduce this Bill. A new companies Act was necessary to change the balance when we first came to office. Now, after nine years of gestation, we have a Bill that requires, at this very late stage, 800 amendments that there will be no time to consider. I have tabled, with my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins), several amendments of genius that I would want to discuss in full. Some have been selected, mercifully, while some have not, but there are serious issues to discuss in relation to each one. Having read the selection list, I find that all my amendments are crammed into Thursday, when we have about 36 groups to deal with. Thursday is going to be hell on the basis of this timetable. I plead for more time, while affirming my deference to our Front Bench and to the purposes of this Government whom I so loyalty support.

Douglas Hogg: I very much support what was said by my hon. Friend the Member for Rutland and Melton (Mr. Duncan), by the hon. Member for Cambridge (David Howarth), and by my relatively close neighbour, the hon. Member for Great Grimsby (Mr. Mitchell). What we are doing is profoundly unsatisfactory. This House faces a very large number of amendments, new clauses and new schedules, many of which were tabled very recently within the past few days. There is no point in the Minister's shaking her head in a despairing way; we are despairing of the conduct of Government Front Benchers. The fact that these amendments—hundreds of them—were tabled but two or three days ago means that right hon. and hon. Members cannot form a view as to their merits. Worse than that, neither can the outside interest groups that would wish to make representations to this House. That is wholly wrong.
	The other point to keep in mind is that this Report stage is the first occasion on which the House as a whole, as distinct from the Committee, can consider the detail of the Bill. The effect of a timetabling motion of this kind is to preclude the House from doing so. Because of the way in which the knives will fall, a whole range of important issues will not be addressed or examined, far less voted upon.
	We are doing this far too often, and there are examples of the chaos that results. I often have to handle the Criminal Justice Act 2003 in the courts, as does my hon. and learned Friend the Member for Harborough (Mr. Garnier). We know full well that the timetabling motions with regard to that Act produced one of the worst criminal justice Acts that the courts have ever had to deal with. We are now doing the same thing, but in this case it is worse because we have not only a new Bill but the new companies legislation incorporated into it.

Edward Garnier: The point that my hon. and learned Friend is making in expressing the criticism that the Government should face is underlined and made all the worse by virtue of the fact that the Bill is largely politically uncontroversial in seeking to bring up to date, consolidate and modernise the law governing corporations, yet the Government say that they are in a tremendous hurry and must allow it go through at an accelerated pace, probably because of their own incompetence.

Douglas Hogg: I agree entirely with my hon. and learned Friend. His comments lead to another point: we could use the carry-over procedure. The Bill is important, so let us use the carry-over procedure. We were willing to use it for the Corporate Manslaughter Bill last week. The measure that we are considering is as difficult, if not more so. Let us take time over it.
	I introduced many Bills when I was a Minister. I suppose that I handled six, seven, eight or nine Bills on the Floor of the House or in Committee. I am therefore well versed in their conduct. As hon. Members know, I am not an especially modest man, but they will accept that it was my considered view that a Minister had to master the detail of a Bill as well as any official; otherwise, the Minister cannot overrule the officials or set policy. Ministers cannot handle Bills that are much more than 30 clauses to that standard of excellence. Bills that are much longer need teams of Ministers to deal with them.
	It is inevitable that Ministers will not understand what they are doing when measures are the size of the Companies Bill. They are thus wholly in the hands of their officials. That is not a proper exercise. Moreover, it makes timetabling even more inappropriate. Any honest and sensible Member knows full well that it is a disgrace and that we are not doing our duty, and will vote against this timetable motion, as against many others.
	I am now looking at the Conservative Whip. When we get into office, he and the Front-Bench team will find people such as me unwilling to support timetable motions. The Conservative party, when in office, had better not ask people like me to vote for such motions because, in general, we will vote against them.

Quentin Davies: In principle I support the Bill, which is well conceived, and I disagree with the hon. Member for Cambridge (David Howarth) about consolidation. It is a good thing that we have turned the measure into a proper, new Companies Bill—potentially an Act. Producing a long Company Law Reform Bill alongside the Companies Act 1985 would constitute a bad day's work by Parliament.

Jonathan Djanogly: The Bill's gestation period was long. We said that there should be consolidation four years before the Committee proceedings started. The Opposition have therefore long held their view on consolidation.

Quentin Davies: Indeed. The matter is bipartisan, not tripartisan, because the Liberal Democrats do not appear to agree with consolidation.

David Howarth: I did not mean to say that I was against consolidation. I intended to convey that the difficulties that we are experiencing with the timetable are a consequence of the decision made by all parties to go for consolidation. Although consolidation is a long-standing idea, the decision to go for it was made only this summer.

Quentin Davies: I may have drawn the wrong conclusion from the hon. Gentleman's remarks, in which case I am happy to apologise and acknowledge that perhaps—although he has not said so explicitly—he is in favour of consolidation. I repeat that consolidation is sensible.
	However, this afternoon's proceedings are a sad and worrying example of what is wrong with Parliament and the way in which the legislative process has been eroded. The Executive branch has achieved a dominance in our constitution that has unbalanced what used to be a fine constitution. That is deeply worrying. I greatly object to the Minister for Industry and the Regions telling hon. Members that if we objected to timetabling we would lose time for discussion of the Bill. That is arrogant because it shows the Government automatically assuming that they have a majority. It also means that the notion of timetabling includes an element of blackmail. The House is constantly told, "You mustn't object, speak your mind or ask for more time because if you do, you'll get even less time for debating the Bill." That is wrong.
	Even worse, the Minister said that the Bill had already been the subject of considerable scrutiny in another place. It is true that the other place spent six months or so on the measure and did a fine job. The other place contains people of great distinction and often technical expertise, whose deliberations are extremely useful to us when we take a Bill from the Lords. The fact remains, however, that the other place consists almost entirely, apart from some hereditaries, of nominated Members—people who have no democratic mandate whatever. The role of the House of Lords as an additional stage in the process is one thing, but the idea that it can replace the House of Commons and that, if a Bill has received a certain amount of consideration in the other place, it requires no more than perfunctory consideration from ourselves, is deeply offensive. It is against the democratic idea that legislation should be undertaken by elected representatives who are directly responsible to those who sent them to the legislature.
	The Minister seems to have forgotten some of what were always essential foundations of our political system. The Bill is a sad example of a malaise, which, I am afraid, has been getting worse for many years. Often, there is no one dramatic moment when everyone focuses on what has happened—but, suddenly, after a few years, we turn around and realise that the fundamental balance of the constitution has been eroded and lost.
	The Minister today gave a particularly bad example of the Government taking its large majority for granted. She has added insult to injury by producing all these amendments at the last moment. What she is telling the House and the country is that the bureaucracy is instructed that even if the Committee stage ends in July, it has two or three months to do any necessary work deriving from the Committee stage and to produce further consequential amendments. It does not need to bother to introduce those until 24 hours before the parliamentary process begins, because the stupid politicians will have no time to spend on them anyway, and they will be rolled over by a large majority. The parliamentary process has therefore become just a decorative aspect of the constitution—a time-consuming and rather trying formality that is really just a rubber stamp for what has been agreed in Whitehall.
	By behaving in that fashion, the Minister has dramatically demonstrated the extent of the contempt for Parliament in Whitehall and in sections of the Government. That is deeply upsetting. We may be defeated in a few minutes, and we may be able to do nothing about it for the moment. Certainly, however, as my right hon. and learned Friend the Member for Sleaford and North Hykeham (Mr. Hogg) said, the next Government must change that. I can think of few other examples of serious problems in our country that so urgently need to be addressed by a change of Government.

Edward Garnier: I agree wholeheartedly with the comments of my hon. Friend the Member for Grantham and Stamford (Mr. Davies). As my right hon. and learned Friend the Member for Sleaford and North Hykeham (Mr. Hogg) said, a Bill as big as this—it is bigger than the Leicestershire telephone book— [Interruption] It is also bigger than the Rutland telephone book. I shall not go into the other variations. My right hon. and learned Friend was entirely right that a Bill of this size needs a team of Ministers to achieve mastery of it. Perhaps what upset me most was the attitude that the Minister displayed to the House when she moved this short motion, as she did not have mastery of that, let alone of the content of the Bill. She did not even know how many schedules and amendments we would have to discuss in little eight-minute sections. Of course, there are many of these topics for which we will even have an eight-minute section.
	The Government do not care. After nine years of this appalling Administration, we are all used to their incompetence, intellectual dishonesty and political shenanigans. What we cannot tolerate, however, and what I find so offensive, is the smugness with which they overlay their incompetence, stupidity and political and intellectual dishonesty. If the Minister thinks that it is appropriate for her, as a Minister of the Crown, to defend her Government's policy and to explain the detail of the Bill in the way that she just has, she ought to be ashamed of herself and of her Government.
	This Bill is one of the most important pieces of legislation to come before this or possibly any other Parliament, as my hon. Friend the Member for Rutland and Melton (Mr. Duncan), the shadow Secretary of State, said. The Government's treatment of it is offensive—to me as an individual, although my personal feelings do not matter, but also to Parliament and, more importantly, to the people who sent us here. Their approach speaks volumes about their attitude to the electorate and to good governance. The sooner we get rid of this lot, the better— [Interruption.] My words appear witty and amusing to the hon. Member for Burnley (Kitty Ussher), the Minister's Parliamentary Private Secretary, who clearly likes to poke fun at people like me. I must seem an easy joke as I stand here in my pinstriped suit and make remarks about the Government's conduct. However, I am concerned about the calibre of the Government and of this Bill, and about the attitude displayed by the Minister and her hon. Friends to the people of this country. I warn them that they ignore our people at their peril, as the electorate will grab the Government firmly by the throat and remove them from office.

Douglas Hogg: Does my hon. and learned Friend agree that we who practise in the law know that people will say subsequently that it was a disgrace that a Bill such as this was not discussed properly by this House?

Edward Garnier: I do not want to embarrass the Minister, but I understand that she is quite close to people who know a little about the law. I hope that she is sometimes advised at breakfast in a way that she finds more acceptable than is the case this afternoon. Frankly, this is not a motion that this House should ever entertain.

Philip Dunne: I am the chairman of the all-party parliamentary group on corporate governance, which has taken a considerable interest in the Bill, for obvious reasons. Some of the largest corporate entities in the country are represented on the group. Many have made representations about the Bill during its passage through the House, and they are horrified by the proposals in the programme motion. The Minister's predecessor handled this brief for four years, but she has not had the same benefit and I fear that she will have difficulty in coping with the Bill's ramifications. Before she puts the motion to a vote, she should consider whether she wants to embarrass herself and her Government in front of corporate Britain plc.

Shailesh Vara: I served on the Standing Committee considering this Bill, and wish to put on the record my concern that it has not been properly managed or discussed, even though it has been before Parliament for some eight years. It is certainly true that not enough time was spent on it in Committee, and it is regrettable that the Government chose to end those proceedings in July rather than carry them over from the summer, which is what the Bill deserved.
	As has been stated, this is the largest Bill ever to go through Parliament. Its consequences are far reaching, affecting the very lifeblood of our economy. It is therefore especially regrettable that the Government should introduce almost 1,000 new amendments and a huge number of new clauses when, once again, the time available for debate is very limited.
	The Government's abuse of power has also been referred to, and that is the right term in this context. The Minister is abusing her power, and she demeans herself and her office by treating the Bill in this cavalier fashion. More importantly, she also treats with contempt the people who will be affected by the Bill—the mainstream public and the businesses that run the economy. The Government amendments and new clauses are detailed and specific. If we do not consider them properly, we risk producing shoddy legislation that will have a negative impact on the business community and on the public at large.
	This Bill is a consolidation measure and comes some 20 years after the Companies Act 1985. However, it does not take into adequate consideration the fact that the global business environment has changed considerably. Business is now compelled to take into account environmental issues and the protection of data, as well as a huge number of other issues that simply did not exist in 1985. Again, we fail in our duty by failing to consider all those issues properly, in the context not only of Britain and the European Union, but of worldwide business.
	Sadly, the Government's not allowing enough time today, tomorrow and on Friday—or, indeed, in previous years—to debate these issues will result in the sad consequence that we shall do a disservice to the business community. In failing properly to scrutinise the Bill, we also fail in our duty to the House and to the country.

Richard Shepherd: I can well understand why the Government have tabled this motion: it has become a habit for them to assume that Parliament need no longer scrutinise legislation. The second reason why I understand this was also given by my right hon. and learned Friend the Member for Sleaford and North Hykeham (Mr. Hogg)—that Ministers are not masters of their briefs on such an extensive Bill as this.
	The House recognises the importance of this legislation, as we have heard from hon. Members on both sides. We recognise that it is a landmark. It is a consolidation measure, but it also covers new ground. The Government have tabled almost 1,000 amendments, and no doubt the Minister will have taken advice from her civil servants on what will actually be constituted by the proposed changes. However, the Government will not allow the House to find a rhythm for the consideration of a landmark piece of legislation that will guide company law. It will directly affect those who run companies, as well as those who are employed by them. It is a major ethical statement of what we regard as appropriate law. That the Minister has come forward with a timetable motion such as this shows a contempt for the House and a failure to understand the central importance of the authority of Parliament.
	I am terrified that a misjudged clause in the Bill could have ramifications right across the business community. That is why Ministers should listen carefully to the people who represent businesses and to those who work in them. They should give consideration to sensible proposals such as that to allow carry-over in these circumstances, so as to permit proper consideration of these matters and to give the Opposition and other Members with opinions the opportunity to comment. As is my tradition, I shall oppose all guillotine motions whenever I am able to do so. This motion traduces the proper purpose of the House.

Margaret Hodge: I have to say to Opposition Members that, by starting the proceedings on Report and Third Reading of this historic Bill by opposing the programme motion, they are playing a very poor political game. They are effectively trying to score a questionable political point at the expense of spending time allotted by the House to the serious and considered scrutiny of the Bill. Indeed, I put it to you, Mr. Deputy Speaker, that this is the knockabout politics that the right hon. Member for Witney (Mr. Cameron) is trying to prevent. The hon. Member for Rutland and Melton (Mr. Duncan) has shown himself to be an old Tory by the way in which he has approached this debate.

Robert Smith: Will the Minister give way?

Margaret Hodge: No.
	The Bill has been developed in a unique way. We have ensured the full involvement of all the interested parties throughout the process.

Shailesh Vara: Will the Minister give way?

Margaret Hodge: No.
	We have sought and achieved a high degree of consensus on the overwhelming majority of the clauses in the Bill. We have—for those who bothered to turn up—approached the parliamentary scrutiny of the Bill in a very co-operative spirit, and been more than ready to listen to suggestions—

Quentin Davies: rose—

Mr. Deputy Speaker: Order. I have to say to the hon. Gentleman that I do not think that the right hon. Lady is going to give way. I felt that it was right, in view of the criticisms that have been made in several quarters, that she should be given ample time to reply to the debate.

Margaret Hodge: If I have time, I will give way to the hon. Member for Grantham and Stamford (Mr. Davies).
	The hon. Member for North-West Cambridgeshire (Mr. Vara) said that he was concerned that there had not been sufficient scrutiny of the Bill. He was so concerned that, one morning in Committee, only the hon. Member for Huntingdon (Mr. Djanogly) was present to defend the Tory line, and there was no scrutiny whatever by any other member of the Committee. When we started to discuss important issues to do with the takeover panel, I was impressed by the ability of the hon. Member for Huntingdon to talk for more than two hours—in fact, he talked the sitting out—without saying anything to purpose.  [Interruption.] Opposition Members do not like being brought to account.

Jonathan Djanogly: rose—

Margaret Hodge: I am sure that those outside the House who hope that there will be considered scrutiny of the Bill—

Douglas Hogg: On a point of order, Mr. Deputy Speaker. Will you confirm that it is the practice of the House, and good manners, that a Minister who launches an attack on an hon. Member gives way to them, so that they can respond

Mr. Deputy Speaker: That is not a point of order for the Chair, as the right hon. and learned Gentleman will recognise. It is possible that the Minister might yet give way at some stage to the Conservative Front-Bench spokesman, but it is up to her.

Margaret Hodge: Thank you, Mr. Deputy Speaker. I had intended to give way to the hon. Member for Huntingdon when I finished the point. He will remember that he spent an entire morning—two and a half hours—talking out a Committee sitting, to absolutely no purpose, just when we were about to discuss the takeover panel. I am sure that those outside the House who hoped for considered scrutiny of the Bill by Her Majesty's Opposition will have been as impressed by his tactics as I was.

Jonathan Djanogly: I thank the Minister for giving way. The reason why I spoke for two hours on the takeover panel is that it is an important aspect of corporate life in this country, but perhaps she fails to appreciate that. We needed to speak about it. She mentioned the number of people in Committee, but I must remind her that it was during Committee that, for the first time in history, the Opposition defeated a programme motion because the Minister could not get her own people there.

Margaret Hodge: The record will speak for itself. Those who were present when we considered the takeover panel will recognise that the hon. Gentleman was doing no less than filibustering, rather than focusing on providing proper scrutiny of the Bill by Her Majesty's Opposition. As for why so many amendments have been tabled this afternoon, I was correct in thinking that there were about 600 of them—there are 655 Government amendments. The other amendments were tabled by members of the Opposition and have been discussed not once or twice, but probably three, four or five times during proceedings on the Bill in this House. The reason for the 600 Government amendments is twofold. First, we all agreed that consolidation would take place, and many of the amendments simply put in place correct cross-references and make the changes required to follow them through. Secondly, we have listened to representations from Conservative and Liberal Democrat Members, and so have come back to the Chamber with other propositions.
	We have wasted enough time on process. Let us now get on with the business of the House and let us give proper consideration to an historic Bill that requires Members on both sides to take the matter seriously. I hope that Members of all parties will now support—

It being forty-five minutes after commencement of proceedings on the motion, Mr. Deputy Speaker  put the Question, pursuant to Standing Order No. 83A(8).
	 The House divided: Ayes 303, Noes 231.

Question accordingly agreed to.

Gerald Howarth: On a point of order, Mr. Deputy Speaker. May I inform you that, today, the Ministry of Defence published an extremely important document, "Defence Technology Strategy", which follows from "Defence Industrial Strategy", published last December? The new document sets out some of the key technology capabilities that it is believed we must maintain in the United Kingdom.
	I must report to you, Mr. Deputy Speaker, that I have spoken to the Secretary of State for Defence within the past few moments. He assures me that copies have been sent to the shadow Secretary of State for Defence, my hon. Friend the Member for Woodspring (Dr. Fox), to the Chairman of the Select Committee on Defence and to the hon. Member for North Devon (Nick Harvey). None of them has received the documents, yet those in industry have copies on their desks. I understand that the media have them, so it is parliamentarians who do not have copies, save for one copy of a 200-page document in the Library. Mr. Speaker regards it as being very important that Ministers report adequately to the House.
	Will you, Mr. Deputy Speaker, refer this matter to Mr. Speaker? Without this document, we simply cannot hold the Government to account. The press will respond to the document today, and if we do not have adequate advance knowledge of it, it is very difficult for us to participate in the debate. The Government get just one bite of the cherry, and we get none. Could you please take up this issue with Mr. Speaker? It is a grave discourtesy to the House.

Mr. Deputy Speaker: The hon. Gentleman has had the opportunity to put this matter on the record, and I am sure that it will be noted by Mr. Speaker. The hon. Gentleman probably supplied the answer to his concern in his remarks. Mr. Speaker has indeed made it clear that he expects hon. Members to have as much early notice as is possible of matters of importance in the form of publications or whatever. Certainly, Mr. Speaker will be concerned that some problem arose with the dispatch of these documents and that parliamentarians did not have what others outside the House had. I am sure that Mr. Speaker will take note of that fact. However, there is indeed a copy in the Library at the moment.

Orders of the Day

Companies Bill  [Lords]
	 — 
	[1st Allotted day]

[Relevant document: The Twenty-eighth Report from the Joint Committee on Human Rights, Session 2005-06, Legislative Scrutiny: Fourteenth Progress Report, HC 1626.]
	 As amended in the Standing Committee, considered.

New Clause 4
	 — 
	Duty to promote the success of the company

'(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.
	(2) In fulfilling the duty imposed by this section, a director must endeavour to—
	(a) have regard to the likely consequences of any decision in the long term,
	(b) promote the interests of the company's employees,
	(c) foster the company's business relationships with suppliers, customers and others,
	(d) minimise any significant adverse impact of the company's operations on the community and the environment,
	(e) maintain a reputation for high standards of business conduct and ethics, and
	(f) act fairly as between members of the company.
	(3) Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.
	(4) The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.'.— [Patrick Hall.]
	 Brought up, and read the First time.

Patrick Hall: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, it will be convenient to discuss the following amendments:
	No. 2, in page 79, line 1, leave out clause 173.
	No. 392, in page 79, line 2, clause 173, after 'faith', insert
	'and as appropriate for the size of the company'.
	No. 393, line 4, leave out from 'whole' to end of line and insert
	'having regard, insofar as he considers them relevant, to the following factors (amongst others)—'.
	No. 394, line 4, after 'to', insert
	'what he considers, in good faith, to be'.
	No. 395, line 13, at end insert ', and
	(g) all common law duties of directors.'.
	No. 396, line 20, at end insert—
	'(4) None of the duties set out in or implied by this section shall take priority over any of the other duties.'.
	No. 397, line 20, at end insert—
	'(4) The duty to promote the success of the company shall be paramount.'.
	No. 398, line 20, at end insert—
	'(4) The Secretary of State must issue a non-statutory set of guidelines concerning the application of this section, which must be updated annually.'.
	No. 788, line 20, at end insert—
	'(4) The duties implied by this section shall not apply to small and medium sized companies.'.

Patrick Hall: I am relieved that, at last, we can get on to the matters of substance in which many members of the public are interested, and I should have thought that many hon. Members are concerned about them, too. I hope that we shall do so with some of the tolerance, good humour and dignity that we experienced in Committee but which we did not experience during the debate on the programme motion.
	It is a little daunting to open the batting on a 1,264 clause Bill. However, thankfully, I wish to speak only to new clause 4 and amendment No. 2—the consequential amendment tabled by my hon. Friend the Member for Portsmouth, North (Sarah McCarthy-Fry) and me.
	The House will be aware that directors' duties have attracted a great deal of attention outside Parliament and, consequently and quite rightly, were subject to detailed and lengthy scrutiny in Committee. I am given to understand that the public response to the issue has been one of the largest of all time. The office of my right hon. Friend the Minister for Industry and the Regions has been inundated by the cards generated by the Corporate Responsibility Coalition and the Trade Justice Movement. I congratulate those two umbrella organisations on their campaign, and I thank the many members of the public who have flagged up their views, both to the Department and to individual Members of Parliament around the country.

Margaret Hodge: My hon. Friend raises issues that are of huge concern to many hundreds of thousands of people outside this House. Does he therefore share my concern that, following an acrimonious debate on the programme motion, only one Conservative Back Bencher has chosen to be present for this debate on one of the Bill's key issues?

Patrick Hall: That is entirely up to the official Opposition, as my right hon. Friend knows.
	I was reflecting on the fact that there is a great deal of interest in these matters outside this place. Therefore, although we should not judge the quality of an issue on the size of the postbag on it, it is right that we recognise the scale of interest and concern and reflect that on the Floor of the House on Report, as we did in Committee.
	I therefore reiterate my welcome for the progress that the Government have made—which is widely supported elsewhere—in respect of this first ever statement in statute that company directors, in fulfilling their primary duty to promote the interests
	"of the company for the benefit of its members"
	should have regard to the six factors listed in clause 173 and new clause 4. Those factors include
	"the interests of the company's employees"
	and
	"the impact of the company's operations on the community and the environment".
	That is the first ever codification, and placement in statute, of duties around the concept of corporate social responsibility. That is, indeed, progress.
	It would be remiss of us, however, not to take this opportunity on Report to seek to ensure that what we end up with is the best outcome—one that is pro-business and at the same time socially and environmentally responsible. New clause 4 follows clause 173 closely, but substitutes "have regard...to" with "must endeavour to". The reason for that is clear. An examination of the "Shorter Oxford English Dictionary" reveals that "endeavour" means
	"To exert oneself...To try"
	or
	"make an effort for a specified object; to attempt strenuously"
	to do something. On the other hand, to have regard to something is to give attention or consideration to it. Whereas "have regard...to" is a subjective test—a director can say that he or she has thought about the six secondary duties listed in clause 173 and new clause 4, and may or may not have done more about them—"must endeavour to" is an objective test, requiring some evidence of having sought to abide by those duties before deciding whether it was in the best interests of the company so to do.

Michael Weir: I agree with the hon. Gentleman. I note that he said that the clause is pro-business. Given the changing environment and the concern about environmental issues in this country, does he agree that good businesses will look to be responsible in any event, because they must move with the times or else they will not survive in the new century?

Patrick Hall: That is an important point, and good businesses do approach such matters in that way. What we are trying to create through the Bill, perhaps as amended, is a level playing field to ensure that they are not disadvantaged for giving emphasis to these important matters.
	I emphasise that what I am proposing would not change the current position that the overriding duty is to promote the success of the company, but it places the six duties that articulate the essence of enlightened shareholder value at the heart of company law, which has never been the case before. The measure would thus place those desirable objectives firmly on the agenda. I am not convinced that merely having regard to them would suffice, but we shall see.
	Being positive about the duties is a pro-business position that helps to create a level playing field underpinning the good practice to which the hon. Member for Angus (Mr. Weir) referred. There is much good practice around, so why not support it in company law? Good companies already do many of the things listed in clause 173, so if those duties are set out in law, and especially if they are strengthened as proposed in new clause 4, it will encourage directors to be proactive, rather than passive, about the long-term impact of their business operations on employees, communities, suppliers and the environment. That would support directors who provide the leadership to take such a route, and why should that not be so? Who would not want it to be so? I suggest that they would be the directors who are irresponsible, short-sighted and too lacking in imagination to see the business case for a more progressive approach.
	Much was made in Committee by several hon. Members who suggested that the position I am advancing would open opportunities for litigation and thus increase insurance costs, and they will be able to make their points today. However, the hon. Member for Cambridge (David Howarth) pointed out several times in Committee that suing a director or a board for not fulfilling all or some of the additional six secondary duties will be limited to few classes of people: the board as a whole, a super-majority of shareholders, liquidators acting on behalf of an insolvent company, and a new board during a takeover. A minority of shareholders could bring a derivative action, although the Bill restricts that option to a very limited number of cases because such action would have to be subject to ratification by the majority of shareholders. However, we should not forget that none of those classes of people could sue for a loss to the company unless they could demonstrate that there was a loss due solely to a breach of one or more of the six duties.
	When applying any of the duties that we care to think of—whether they are the six secondary duties listed in clause 173, the other seven outlined as general duties in chapter 2 of part 10, or several in an amazing list of 640 or so duties, the existence of which the hon. Member for Huntingdon (Mr. Djanogly) repeatedly mentioned in Committee—directors are expected to act in good faith, to exercise reasonable care, skill and diligence, and to do what is most likely to promote the success of the company for the benefit of its members as a whole. Suing a company director is difficult enough already, so attacking new clause 4 on the basis that it would make such action more likely is not a credible argument. On the contrary—I accept that this is at the margins—the measure would help to protect directors who took responsible and long-term decisions and strengthen the hand of shareholders who wished to challenge directors who did not do that. The power to challenge such directors would come not from new clause 4 or clause 173, but elsewhere, because it is already well established in law.

Jonathan Djanogly: The hon. Gentleman will appreciate that businesses are worried that if they are to be able to show that they have taken notice of the items, they will have to set up processes, introduce new sorts of board minutes and effectively go through all the individual requirements, which will lead to more box ticking and administration.

Patrick Hall: Several of the objectives, such as looking after the environment and caring about one's employees, are issues that all good companies would have no difficulty in addressing. Those that experience such difficulty should be put in a position in which it is unacceptable for them to continue in such a way. Of course, it will be argued that any demand generates time and bureaucracy, but there must be a balance. Some companies already do what is proposed, as the hon. Gentleman knows, and they do not make arguments about ticking boxes and excess bureaucracy. There will obviously be some consequences if we take that route, but there will be hidden and unrecognised costs if we do not do so.

John Redwood: I am keen that companies should do their bit for the environment, but can the hon. Gentleman explain what the provision about the environment adds to the big body of environmental legislation and regulation that companies rightly have to observe at present?

Patrick Hall: Indeed, British companies have to obey British law. The provision would put the obligation at the centre of company law, where it would be firmly on the agenda. It would also apply to the behaviour of British companies in their overseas operations, as British statute law does not.
	I want to touch on the criticism that the new clause would lead to conflict between the different duties. That is certainly not the intention of the proposal, nor would that be its effect. The primary duty remains clear; were there any conflict the directors have the means to resolve it in the normal way, as at present. There is no change in the current situation or as it is envisaged in the Bill, so I do not agree with the criticism.
	It has been suggested that the new clause represents a pluralist approach to corporate social responsibility. That is absolutely not the case. A pluralist approach would allow the interests of all the company's stakeholders—its employees, the wider community, local residents and consumers—to be given the same priority as the interests of shareholders. It is true that such a situation is a desired long-term objective of CORE—the Corporate Responsibility Coalition—and others but I accept entirely that the framework advanced by the Government through the Bill is one of enlightened shareholder value. The Bill is not about a pluralist approach, nor is the new clause. It is firmly under the umbrella of enlightened shareholder value, which means that the primary duty of directors is to promote the success of the company. If there is to be suing for loss, only losses to the company will count.
	Before I conclude, I want to make some observations about the position of the official Opposition. In the other place, in May, Conservative peers sought to remove all matters pertaining to enlightened shareholder value—an attempt to turn back the clock on the progress that is being made in company law. The word "reactionary" may be appropriate. Their position flies in the face of the new support for corporate social responsibility and compassionate Conservatism offered by the new leader of their party, the right hon. Member for Witney (Mr. Cameron), who has made some welcome and strong comments in support of the enlightened shareholder value perspective, so different positions are on display.
	In Committee, we saw clear evidence of the conflict and difficulties in the Conservative party—Conservatives did not know where to stand or which way to face. Although the hon. Member for Huntingdon did not try to repeat the tactics of his friends in another place, he none the less—courteously and good-naturedly, as always—tried to weaken the Government's approach, never mind mine. It would seem from the amendments that have been tabled today that he and his colleagues are trying to do the same again.
	The hon. Gentleman has described the road to enlightened shareholder value as one of good intention but meaningless platitude, and the six secondary duties listed in what is now clause 173 and in new clause 4 as a statement of fashion. Let me explain what that statement apparently applies to. Is it fashionable to
	"have regard...to
	(a) the likely consequences of any decision in the long term,
	(b) the interests of the company's employees,
	(c) the need to foster the company's business relationships with suppliers, customers and others,
	(d) the impact of the company's operations on the community and the environment,
	(e) the desirability of the company maintaining a reputation for high standards of business conduct, and
	(f) the need to act fairly as between members of the company"?
	To describe those issues as the mere trivia of fashion is wrong, although I am happy to allow the hon. Gentleman a chance to explain himself.

Jonathan Djanogly: I thank the hon. Gentleman for giving me the opportunity to explain what he has misconstrued. I mentioned that those were objects of fashion and I repeat that statement. I say that not for the reasons that he gave, but because there are some 650 common-law duties, of which these six are part, and the Government have cherry-picked certain duties that they want to put into the Bill. All the duties are equally relevant. I am not saying that the six that the Government have chosen are not relevant; I am saying that they should not be codified.

Patrick Hall: That indicates some of the difficulties that the Conservative party has on this issue. Frankly, to regard all 650 duties—I take the hon. Gentleman's word for the fact that there are 650—as of equal weight and value is not credible and does not stand up to scrutiny. Looking after one's employees, and having regard to the local community and the environment are perfectly reasonable issues to give higher priority to. We know that the right hon. Member for Witney adopts a kindly, sunny and progressive stance on these matters. The Conservative party went to the polls last May on the ticket, "Go green, vote blue," but when it comes to delivery and to contributing to company law through this important Bill, we have seen confusion, weakness and another policy vacuum.
	Finally, I know that my right hon. Friend the Minister for Industry and the Regions takes a genuine, sympathetic and detailed interest in these matters. With clause 173, welcome progress is being made. In Committee, she did not accept my argument that "having regard to" is just too passive and that we should take the opportunity, as suggested by new clause 4, to protect responsible directors and to encourage a proactive, pro-business approach within the ambit of enlightened shareholder value by asking them to "endeavour" to do their best. I look forward to her response. We are not worlds apart, but what she says on the record is really important.

Jonathan Djanogly: I declare my interests as they appear in the Register of Members' Interests. After seven years of consultation and 10 months of Bill process, involving several thousand amendments—650 of them tabled by the Government in the past week—we near the end of the process on the largest Bill in history. One issue that is directly relevant to every group of amendments to be discussed on Report is the timing of implementation. There is much speculation and there are many rumours going round the City and the law firms on that point. It would be most helpful if the Minister could set out the position when the opportunity arises for her to do so.
	I will speak to our amendments Nos. 392 to 398. As the hon. Member for Bedford (Patrick Hall) said, the issue of directors' duties to promote the success of the company as set out in clause 173 is the area of the Bill that has probably courted the most controversy. I do not believe that the Government really wanted that when they set out with the Bill, but gradually, possibly over seven years of consultation, they have dug themselves into something of a hole on these provisions, from which they are now finding it difficult to extract themselves. We have seen that in the conflicting messages from Ministers since the Committee stage. It was interesting to hear the hon. Gentleman say that we are sending out conflicting messages. I suggest that quite the opposite is the case.
	For example, in an article in the  Financial Times of 26 September, the Minister, then at the Labour party conference, was reported as saying that the Government were listening to lobbyists and could still use regulations to increase reporting and behavioural requirements for directors, once the Bill was
	"in force and people start understanding it".
	On the other hand, the Secretary of State was reported as saying, within 24 hours of the Minister of State's remarks, that the Government did not intend to introduce any changes on Third Reading. I am therefore slightly confused, not least because, without advising us, the Minister tabled amendments to the provisions on accounts and reports, which we are to discuss tomorrow.
	The plot thickens yet more. The Minister needs to advise the House whether there is a secret Labour, or perhaps trade union, agenda, or whether two Department of Trade and Industry Ministers are pulling in different directions. Of course, new clause 4, tabled by Labour Back Benchers, creates a third position. Business expects a clear direction from the Government, but in this respect it is not getting it.

Jim Cousins: Perhaps the hon. Gentleman will tell the House how his amendment, No. 392, which would qualify the requirement so that a director would have to act in good faith according to the size of his company, makes matters sharper, clearer or more precise.

Jonathan Djanogly: To put it briefly, we have tabled the amendment because the Conservative party believes that small companies are more susceptible to regulation and that their individual circumstances should be taken into account.
	In our amendments, we are attempting to take a constructive approach to improving the provisions, as the hon. Member for Bedford acknowledged. The amendments therefore take account of the still widespread concerns throughout the legal and business communities. We do not feel that they would weaken the Government's position; that is not our intention.
	Part 10 and clause 173 are designed to codify existing, mainly common-law, principles relating to the responsibilities of directors. That has led to vociferous and growing complaints from across the legal and business communities that those provisions in particular could cause company law to be altered dramatically for the worse. Historically, judges have had the discretion to deal with complicated issues relating to directors' duties on a case-by-case basis; that system has been adaptable and effective in dealing with cases that are often complicated and highly technical. The existing duties found in common law rules and equitable principles which have been built up over the years in the courts are now to be replaced by the statutory statement in part 10. A flexible system is to be replaced by an inflexible one.
	On the one hand, the Government have said that there will be no change in the common-law position; yet on the other hand, they have introduced the concept of enlightened shareholder value, which all legal experts agree will alter the common-law position of acting in the best interests of the company. We believe that there is a fundamental gap in the Government's train of thought: either they are introducing a new concept—enlightened shareholder value—which is an extension of the common law, or they are simply codifying the existing common law. The Minister has still not made clear which course the Government are taking. According to the many interested parties whom we have consulted on the Bill, the position seems to be clear: if the audience is business-oriented, the Government message is, "Don't worry—nothing is going to change. This is only a restatement of the existing common-law position."

John Redwood: I remind the House that I have declared my interest as a company director in the register.
	Taking for an example the part of the clause on the environment, does my hon. Friend think that it means that a company director would have to do more than simply comply with all existing environmental and planning laws to show that he had satisfied that requirement?

Jonathan Djanogly: My right hon. Friend makes an important point. It can be argued that the law would not be expanded. However, companies have told us that dealing with it on a daily basis will involve going through more red tape, setting out the steps that they take when reaching decisions in a way that has not previously been thought to be necessary. They regard that as otiose. Indeed, the Minister and I attended a conference in the City at which counsel for a very large public company made exactly that point. Companies are concerned by the proposal.

Patrick Hall: The hon. Gentleman conceded in Committee and today that successful companies do these things anyway, and do so while being successful, so how does he equate the two and why does he see it as burdensome?

Jonathan Djanogly: I certainly agree that a successful company will have regard to many of the items set out in the list in clause 173. That is not in dispute. However, the experts are saying that for companies to be able to show that they have complied with the clause will require further red tape, which they believe is unnecessary.

Stewart Hosie: rose—

Jonathan Djanogly: I shall make progress.
	The Government change their viewpoint, depending on the audience.

Margaret Hodge: Will the hon. Gentleman give way?

Jonathan Djanogly: No. I shall finish my point. If the audience is a campaigning body, the Government's tactics seem to change. They go on to talk about the concept of enlightened shareholder value and how it will change things. For instance, I mentioned the conflicting statements made by the Minister and the Secretary of State at the Labour party conference. Perhaps the Minister will explain how those are complementary.

Margaret Hodge: I thank the hon. Gentleman for giving way. I shall explain the Government's view when I respond to the amendments. I am interested in the Conservative party's point of view. Does the Conservative party support clause 173 with its acceptance of enlightened shareholder value—yes or no?

Jonathan Djanogly: In the puerile terms of the Minister's question, the answer is no. Do we have sympathy with the concept of enlightened shareholder value in its most amorphous terms? Yes, we do. Of course, we do not accept the clause as drafted, because I have just proposed half a dozen amendments to it. We think that it can be improved. Are we suggesting that the clause should be taken out of the Bill? No. The clause should stay in the Bill, but needs significant amendment.

John Gummer: Should not my hon. Friend bring home to the Minister the point that the measure has been got together to get off the hook that the Chancellor of the Exchequer got us on by unilaterally removing the legislation that had been promised? Is this not a fake organisation by the Government to try to get themselves off the hook with the green movement, whose members realise that the Government are all talk and no do?

Jonathan Djanogly: My right hon. Friend puts his point strongly. As I said at the outset, the Government are trying to dig themselves out of a hole by means of the clause. There is no point in the Minister asking me "yes or no" questions because the matter is rather more complicated and sophisticated than that. I shall come to the Conservatives' viewpoint in terms of corporate social responsibility, if she will only give me a chance.
	If we look at where the pressures are coming from, we can see from its briefings that the TUC supports codification and makes an explicit link between the success of the company, the interests of employees and the other matters for consideration listed in the clause, and makes it clear that directors should have regard to these matters. The TUC sees that link as a significant step and wants clear and comprehensive guidance and reporting, which it sees as contributing to raising standards of corporate behaviour. How does a significant step not constitute a change? The Minister must come to terms with that anomaly in her position.
	Our party supports many of the good intentions voiced by the Government when they talk about enlightened shareholder value. We have no problem with any of the individual items listed in clause 173, as I made clear to the hon. Member for Bedford in my intervention. For the most part, they exist as common- law responsibilities in current law. However, in the context of sound law, these intentions can easily slip into platitudes, and that view is reflected by many commentators on the Bill.
	The Association of British Insurers supports the enlightened shareholder value approach, but says:
	"We have nevertheless had concerns that codification might lead to a compliance driven approach to the exercise of directors' duties rather than one based on the making of good-faith judgements. This could lead directors to take expensive and time-consuming legal advice, impair efficient decision making and add an unnecessary layer of bureaucracy to board practices. Codification of directors' duties would not then achieve its goal of greater transparency and accountability, but instead create new uncertainties and larger administrative burden."
	The Law Society says that it
	"doubts that the savings for business which the government anticipates will be achieved. On the contrary, the new provisions on directors' duties will result in new uncertainty, increased legal costs and additional bureaucracy...In particular, the Law Society believes that the new code is inflexible—at present, the courts have considerable freedom to develop the law on directors' duties to suit changing needs and expectations and in practice the code will not be more accessible than common law rules, as its meaning will over time become less and less clear to a reader who does not also understand how it has been interpreted and applied by the courts."
	It is very clear that while the Government protest that they are not changing the common-law position, they are doing just that—a course that will lead only to confusion where there should be clarity. But also, and in some ways even less helpfully, the clause could impede the future development of the common law, which is a very developed area in this country compared with many other jurisdictions.
	The list of the six factors to which a director must have regard as set out in clause 173 seems arbitrary. It has been calculated that some 650 common law duties of directors have been laid down through the common law and various statutes over the years, and in Committee, as the hon. Member for Bedford mentioned, I set out quite a number of those. Why have the six in the Bill been deemed more important than all of the others? We recognise that putting the duties into one format would give clarity to company directors. That is why we have supported, in amendment No. 398, the Law Society's proposal to publish a non-statutory guide to directors' duties.

David Howarth: May I ask the hon. Gentleman the question that I asked the Committee, which is how can guidance in a statute be non-statutory?

Jonathan Djanogly: I am not saying that the guidance should be statutory; I am saying that an obligation to provide guidance should be put into statute. I think that the Government have said that they intend to give non-statutory guidance to directors, but they have not yet done so, and it would be helpful if the Minister could say when that will happen.
	The factors to which a director must have regard, as set out in clause 173, include many responsibilities that directors already have to have regard to as set out in statute, such as environmental concerns. In some cases the Government are weakening existing statutory duties. Although the Government have taken some of the more fashionable responsibilities already imposed on directors by statute or common law, they have curiously chosen to ignore others.

Margaret Hodge: Which ones?

Jonathan Djanogly: I think that I gave the Minister a list of about 45 in Committee and I will leave it at that.
	We are not arguing here that all directors' common- law and statutory duties should be put into statute. That would be nonsensical, particularly as the common-law duties are being advanced all the time. However, amendments Nos. 393 and 395 would oblige company directors to give consideration to all other common-law duties of directors. A non-statutory guide, as provided for in amendment No. 398, could then give directors some guidance as to what these duties are, without the guidance being enshrined in statute.
	A May 2006  Financial Times lead article entitled "A missed opportunity" says:
	"The stated aim was to make directors' duties clearer and more up-to-date. The reality is a confused list that mixes platitudes with necessary duties...the Government's approach betrays an underlying mistrust of business."
	This area has also prompted serious concerns from the legal profession. A host—I say a host—of major corporate law firms, whose job it will be to interpret the clause, have told us that the matters listed in clause 173(1)(a) to (f) make a rigid list of factors that may artificially constrain the decision-making processes and provide inappropriate challenges to the way in which directors have exercised their discretion. The list of factors set out in clause 173(1) is applicable to all types and sizes of company, but the listed matters may not be appropriate for directors to take the best decision in all circumstances. The director of a major plc and the sole director of a corner shop will not take into account the same factors when they make important decisions, and the judgment of directors is at real risk of becoming artificially fettered by their having to tick-box through a checklist of factors that may have no relevance to what their company does.
	The Law Society has pointed out that the list of factors in clause 173(1) which a director must consider raises the possibility that the courts will be given the power to review business decisions made by directors in good faith, thereby undermining the well-established business judgment rule. That could adversely affect the management of companies and be a significant burden for businesses in terms of both time and cost, because businesses would have to examine those factors before taking any decision. That is why we have tabled amendment No. 393 on the recommendation of the Law Society, the CBI and the Association of British Insurers. It would require directors to take into account all those factors only if those factors are relevant to the matter under consideration and if it is reasonably practicable to do so, which would qualify the requirement to take all the factors into account all the time.
	Amendment No. 788 would tie clause 173 to large companies, relieving smaller companies of extra bureaucracy and red tape.
	The introduction of factors to which directors are required to have regard in discharging their duty under clause 173 may also create new uncertainties for third parties. That is because a transaction entered into with a third party who has notice of a breach of a fiduciary duty by one or more of the directors relating to the transaction is voidable at the option of the company, which may result in third parties seeking an assurance that directors have complied with that duty and have had regard to the factors listed in clause 173.
	We also believe that directors will be more exposed to actions for breach of duty, in particular following a takeover or in the event of a company becoming insolvent when there is new management, which may want to recoup losses from whatever source is available, including previous directors. An increase in the risk of personal liability is likely to discourage many individuals from taking up directorships of UK-incorporated companies and is also likely to discourage those who take up directorships from taking decisions which might give rise to personal liability in the future, if those decisions ultimately turn out to be detrimental to the company.

David Howarth: The hon. Member for Bedford (Patrick Hall) has already raised those accusations. The question is: what loss can a company suffer as a consequence of the breach of those duties which would be actionable in the circumstance described by the hon. Member for Huntingdon (Mr. Djanogly)? I remind him how the law works: it must be the company's loss, not somebody else's.

Jonathan Djanogly: With respect, the hon. Member for Bedford was not supporting my point. The hon. Member for Cambridge (David Howarth) has missed the point that clause 173 must be taken with other provisions in the Bill in order for one to conclude that directors may have greater liabilities. If one puts those provisions together, one comes up with that answer, which does not allay my fears.
	Amendment No. 394 would require directors to consider only those factors which they, in good faith, considered relevant to the matter in question. Provided that they acted in good faith, their decision on the relevance of a particular factor could not be called into question by the courts, except to the extent that the directors acted in breach of their duty to exercise reasonable care, skill and diligence.
	Concerns have also been raised that the list does not make clear the ranking of the factors. That is why we have tabled amendment No. 396, which states that no one duty should take precedence over another.
	The fundamental problem with clause 173 is that it clouds the paramount duty of directors to consider the best interest of the company; I do not think that the hon. Member for Bedford was saying that that should not be the paramount duty. This is the kernel of the issue: as I have said, the other duties are all important, but the ultimate responsibility of a director is to the best interest of their company, and from that fundamental duty all other responsibilities spring. By clouding that duty, the Government will do a great disservice to company law and company directors for a long time to come. That is why we have tabled amendment No. 397, which states that
	"The duty to promote the success of the company shall be paramount."
	The hon. Member for Bedford promoted his concept of corporate social responsibility. Let me spend a little time addressing his concerns. CSR is now taken more or less seriously by all the larger companies based in this country; it is generally agreed that it is no more than good business sense to do so. My party, too, has shown how highly it values CSR. We in the Conservative party support social responsibility in companies. We believe that companies, in preference to the state, can and should be a positive driver of environmental and social change. In fact, we have placed increased corporate responsibility at the top of our agenda, even in being what my right hon. Friend the Member for Witney (Mr. Cameron) called a "critical friend" to big business when necessary. No Member, certainly no Conservative Member, would dispute that increased CSR is a good thing and a developing area.
	However, we argue that this Bill is not the place in which to place unnecessary non-specific mandatory burdens on company directors of all UK companies. That will not only lead to uncertainty and the fear of litigation but set back an agenda that my party supports. The environmental agenda, which was mentioned by my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), is of prime importance to Conservatives; that is why we say that we need a climate change Bill. However, that is different from making broad statements in a very precise Bill, which will lead to more tick-box exercises by companies with little gain to the environment. There are many campaigns to improve corporate environmental and social involvement across the world—indeed, sometimes across companies.
	The problem is that very few of the companies involved will be affected by the Bill, because most such multinational companies are non-UK companies. Let me be frank: we can make our company law regime as rigid as we wish, but it will not matter a jot to most of the companies that hon. Members probably have in mind, and will therefore not go far in helping to further their individual campaigns. Most major multinational companies that are UK-listed already take CSR very seriously and spend considerable amounts of time and money on it. We can all too easily ignore the fact that many publicly listed companies sell themselves on their CSR reputation. Furthermore, increasing numbers of shareholders are realising that they can exert a positive influence on the companies that they ultimately control, and we wish to encourage that. The rise of "green" and "ethical" investment funds operated by most of the major fund managers has made them clearly aware of CSR, and it is now simply bad business for a major PLC to ignore it.
	The vast majority of companies affected by the Bill—perhaps 99 per cent.—are small and medium-sized companies. Those companies, which are rarely the target of environmental or social campaigns, already have enough troubles without being asked to jump through a series of statutory hoops. Because the Bill deals with UK companies, it does not have the framework to deal with the issues on which activists have been campaigning. It treats the corner shop in the same way as the multinational. It is the wrong place to be dealing with these issues, important as they may be. That is why we tabled amendment No. 392, which proposes that duties shall be appropriate to the size of the company, and amendment No. 788, which would exclude small and medium-sized companies from the provisions.
	Many organisations have taken an active interest in the Bill, and I have met several of them. In Committee, the hon. Member for Bedford stated that a voluntary approach would not work and referred to examples of corporate, social and environmental abuse. He hoped that providing legislation on that would raise the bar for CSR. However, the Bill as drafted will merely provide vague language to govern directors and serve to confuse businesses, particularly small and medium-sized companies. That is why we tabled an amendment that would limit it to larger companies.
	That said, we believe that the UK should be the world leader in promoting good CSR. Where UK companies lead, Conservatives believe that other companies will follow. However, the answer to leading the way in CSR is not to impose a heavy regulatory burden on our companies but to encourage investors to take into account a company's record on CSR and to encourage all the companies in the UK to understand that being socially responsible is in the best interests of the company. Governments certainly have a role to play in this; indeed, we often forget the need to use carrots for best practice as much as threatening the stick of regulation. I have no doubt that CSR will also be moved ahead by market forces. Informed consumers voting with their feet will always be a more effective way of getting companies to take up their CSR responsibility than regulation will ever be.

Sarah McCarthy-Fry: Unlike many hon. Members present, I was not fortunate enough to serve on the Standing Committee, but I should like to speak to new clause 4 and amendment No. 2, tabled by my hon. Friend the Member for Bedford (Patrick Hall) and myself.
	Just over a year ago, I tabled an early-day motion, which was signed by more than 220 hon. Members, setting out why company law needed to be modernised for the 21st century. I warmly welcome the Bill, particularly the fact that it clearly states the Government's position with regard to enlightened shareholder value. That clarity seems to be sadly missing from the Conservatives' approach; I am sure that that will not go unnoticed.
	I tabled the amendments in the hope that we could go a little further. New clause 4 proposes a positive duty for company directors to take responsibility for the impacts and interests of their companies in the round by endeavouring to minimise adverse impacts on the community and the environment, promoting the interests of employees, and maintaining high ethical and business standards. That is merely what we have a right to expect of our companies as responsible members of the global community. Modernising company directors' duties in that way would give them a clear incentive proactively to consider the impact of their business operations on their employees and suppliers and on the companies and environment they rely on. By empowering directors to take their responsibilities seriously, we would give room for our companies' huge energy and innovation in terms of delivering unprecedented social and environmental benefits. By making it a clear and positive duty, we would provide an incentive for those directors who do not take their responsibilities seriously to think again.
	I am a Labour and Co-operative MP. For the co-operative movement, corporate social responsibility is integral to doing business, and always has been. However, it should not only be the concern of co-operatives and social enterprises. It is in the long-term interests of the economy and of society as a whole—and in the interests of the long-term success of companies themselves—that all businesses operate in a responsible and sustainable way.
	I support the efforts that the Government have made to encourage responsible business practices, including through the promotion of business education and best practice in CSR. The Bill, particularly through the codification of directors' duties, addresses a fundamental premise. Should a company operate only in the interests of its members—its shareholders—or should it have a wider remit and operate in the interests of stakeholders? If we accept that, as I do, how should we manage it—by legislation, regulation or voluntary code? That goes to the heart of the matter. In my view, as I said on Second Reading, it is no longer acceptable for financial profit to be the only motivating factor in doing business. Many businesses already acknowledge a wider responsibility to consider the interests of employees and the impacts on the local community of doing business—the essence of what we say is CSR.
	Regrettably, though, despite an increasing number of commitments by companies to a more responsible way of doing business, we have evidence that there are still far too many failures to deliver. As my hon. Friend the Member for Bedford noted, the amendment is supported by members of the Trade Justice Movement and the Corporate Responsibility Coalition. Like most hon. Members here, I have received an enormous number of postcards, letters and representations on this. Many of these organisations have compiled large bodies of evidence detailing the failure of a purely voluntary approach to CSR. When I spoke back in June on Second Reading, I said that  The Times had uncovered allegations that Portuguese children as young as 11 were being paid just $20 a day to make shoes for the clothing chain, Zara. It is therefore with a sense of déjà vu, as well as concern, that I note Channel 4's recent story alleging that factories in Bangladesh that produce clothing for Tesco have employed children as young as 12. ActionAid has also exposed Tesco for paying poverty wages and failing to observe basic health and safety standards in the use of pesticides.
	Tesco is a market leader—a competitive business that recently announced record profits. Many consider it to be a leader in corporate social responsibility, but it obviously continues to fail to deliver that completely. Tesco is not a lone case. Shell is another successful company, which has been at the forefront of promoting the idea of corporate social responsibility, but the social and environmental problems that its activities in Nigeria have caused first came to the world's attention in 1995. Christian Aid and Friends of the Earth recently produced reports that show that communities and the environment in the Niger delta suffer because of oil spills, gas flaring and other activities that Shell causes.

Michael Fabricant: By contrast, will the hon. Lady take the opportunity to praise the work of Waitrose, part of the John Lewis partnership, which has an Africa foundation, which provides wages that are acceptable not only to those who receive them, but to hon. Members of all parties? It also promotes education and training in the countries from which it buys produce.

Sarah McCarthy-Fry: I am more than happy to praise companies that implement corporate social responsibility. I was in Ghana recently and I met representatives of an organisation called the Blue Skies company, which operates the highest standards for its employees, provides a high quality product and looks after the interests of the local community.
	The highest profile companies are the most easily monitored by campaigning organisations such as the Trade Justice Movement, Christian Aid and Friends of the Earth, and the media. They, therefore, feel the pressure to improve most keenly. However, thousands of British companies have a multinational impact—far too many for the non-governmental organisations to police, as some suggest as a solution. We need a change in the law and the Bill gives us an opportunity to bring that about.

John McDonnell: One of the points that companies make is that they want a level playing field. Those that develop good practice do not want others to undercut them and compete by driving everyone down to the lowest common denominator. The good companies want a level playing field of good practice throughout.

Sarah McCarthy-Fry: I could not agree more. Putting a stronger emphasis on action and encouraging a more active approach by directors is more likely to lead to genuine world improvements and create the level playing field that my hon. Friend mentions.

John Gummer: The hon. Lady and I agree about many things. Why does she believe that the Government turned their backs on the six years of work that companies did to report their actions on such issues? The Government told them that they had to do that but then, on the Chancellor's whim, the policy was thrown out one night because he thought that he would buy off people who did not like corporate social responsibility.

Sarah McCarthy-Fry: I do not want to pre-empt tomorrow's discussion on the business review aspect of the Bill, but I believe that the majority of companies would welcome the opportunities in the business review, which will enable them to report their activities.
	There must always be a balance between incentive and regulation in the framework in which we expect companies to operate. However, a company does not exist in isolation and its value is much more than its capital and the way in which it uses that. A company must take into account its value, brand and reputation. That will apply increasingly as investors and consumers become more sophisticated about the way in which they get involved.

John Redwood: I have much sympathy with the hon. Lady's aims and with the idea that good directors should do as the new clause suggests. However, let us take the example of an oil company—hon. Members will be pleased to know that I have nothing to do with oil companies. If the new clause were accepted, would an oil company have to decide that it could not promote the sale of petrol to gas guzzlers and people who use too much fuel and that, to satisfy the provision's requirements, it would have to consider the environment in the long term and move away from a petrol-based model? Is that what the hon. Lady has in mind?

Sarah McCarthy-Fry: The right hon. Gentleman reads far too much into the new clause. The word "endeavour" is important. Directors would have to endeavour to consider the wider environmental impact and ensure that their actions did not have an adverse impact. However, they would have to examine the wider picture and I do not envisage what the right hon. Gentleman suggested happening.

Jim Cousins: Does my hon. Friend acknowledge that the new clause would require directors to consider "significant adverse impact" on the environment, whereas clause 173 is much weaker and the Opposition amendments are so weak and generalised that they would leave any director in a state of confusion about what he or she was supposed to do?

Sarah McCarthy-Fry: I thank my hon. Friend for that intervention—he raised a point that I should have made. "Significant" is a significant word. The amendments that the Opposition have tabled would significantly weaken the Government's objective. All that I am asking is that we tweak it a little to make it more positive.
	The new clause will not open the door to spurious legal challenges. Our amendments would achieve the right balance between rights and responsibilities. I hope that my right hon. Friend the Minister will consider new clause 4 and its aims seriously, and I look forward to her reply.

David Howarth: I begin with the point that the hon. Member for Huntingdon (Mr. Djanogly) made about whether clause 173 constitutes reform. It is a reform because it is clearly different from the previous law, and it is welcome because it supports the development of corporate social responsibility in a way that will protect directors who believe that such matters are important from litigation, which is far more likely to arise than the possibility that the hon. Gentleman raised.
	I want to direct most of my comments to new clause 4 and the amendments that the hon. Member for Huntingdon tabled. As I said in Committee, I have every sympathy with the motives of those who tabled the new clause. It is important to drive forward the debate on corporate social responsibility. Unfortunately, after much thought and having considered the debate in Committee carefully, I remain of the view that clause 173 is a better way forward at this stage.
	Clause 173 is better for two main reasons. First, I am still worried about the problem of contradictory duties. The hon. Member for Bedford (Patrick Hall) mentioned that and I believe that the problem remains. Secondly, the new clause raises expectations that it cannot fulfil. There is a risk that it will make matters worse for good directors who want to follow a social responsibility agenda.
	Let us consider contradictory duties. The central problem is the requirement in the new clause for directors to
	"minimise any... adverse impact... on the community and the environment".
	That is different from clause 173, which simply asks directors to "have regard to" the environment and the community. It is impossible to minimise two things simultaneously when there is a trade-off between them. Let us consider a company that is engaged in inherently polluting activities. The way to minimise pollution and thus the impact on the environment is plainly to close the factory. However, that cannot minimise the impact on the community because of all the jobs that would be lost. That also works the other way around. To minimise the impact on the community, the factory must be run as efficiently as possible, at least as regards cost, but that might well lead to worse environmental circumstances.

Michael Weir: I am interested in the hon. Gentleman's comments. Yesterday, we held a debate on a switch to green taxation, which the Liberal Democrats proposed. Surely the point of environmental and green taxation is to ensure that directors
	"minimise any significant adverse impact of the company's operations on the community and the environment".
	It is to change the way in which companies operate and realise the principle of the polluter pays. Is not the hon. Gentleman arguing against the policy that the Liberal Democrats promoted yesterday?

David Howarth: Not at all. The problem is in the word "minimise", which means to make as little as possible. Green taxes both reduce anti-environmental behaviour and raise money simultaneously, but they do not reduce the activity to zero. The problem is in the trade-off, as opposed to minimising, which is the problem of the clause.

Patrick Hall: Trying to minimise significant adverse impact on the environment is overridden by the primary duty of acting in a way to promote the success of the company. How could one promote the success of the company by closing the company? If one closed such a company, one would not just be minimising but eliminating.

David Howarth: There are often examples, which we have discussed on the Floor of the House, of a company that thinks that the way to maximise profits is to close down one part of its operation. The hon. Gentleman's point is not therefore an objection. I thought that he was going to say that his new clause uses the words "endeavour to minimise". I have been thinking about that point over the past few months. Technically, it is possible, I suppose, to endeavour to minimise the adverse impact on both the environment and the community, to fail to do both, but then to argue that one has not breached the duty because one has tried to minimise both but failed. That seems a terrible way to draft a duty of directors—it is saying that if they apparently fail to fulfil that duty, they will be let off, because they only have to try to fulfil it. The better, more positive and encouraging way to do it seems to be as the Government have proposed—to say that the director must "have regard" to both the environment and the impact on the community. I am therefore still worried about the contradictory duties point.
	My second objection to new clause 4, which is the reason I prefer the Government's approach, is that it raises false expectations. We have already heard two very different points of view from the hon. Member for Bedford (Patrick Hall) and the hon. Member for Portsmouth, North (Sarah McCarthy-Fry) with regard to whether the new clause promoted a pluralist view of company law or was sticking to the Government line of enlightened shareholder value. The hon. Gentleman was correct that the new clause does not abandon the Government's basic stance of enlightened shareholder value. The hon. Lady, perhaps talking directly to the campaign groups, was saying that it was an attempt to move the pluralist view on. It cannot do both.
	An underlying problem is what company directors' duties are under the enlightened shareholder value system. It is important to remind ourselves that as long as that system is in place—and the new clause does not challenge that system—the directors' duties are to the company, not to anyone else. The hon. Member for Bedford used that point to reinforce his argument, which I think is correct, that there is not much risk of litigation under the new clause, or under clause 173. Who can sue as the company in such a situation? Normally, the board of directors represents the company, and decides whether to sue. If not the board, in some cases, a majority of shareholders—usually, a super majority of 75 per cent.—can order the company to sue. As he said, rare derivative actions will occasionally occur, which we shall discuss later. The scope for using such derivative actions, however, is limited. More likely, as the hon. Member for Huntingdon mentioned, is action by takeover bidders, or administrators—or liquidators—on behalf of creditors after the company has gone insolvent. Those are the only people likely to be using directors' duties litigiously. Are those people—institutional investors, commercial creditors and boards of directors—likely to put forward, and implement through litigation, a strategy based on pluralism, which is more concerned with the environment and the community than with the company's profits? I dare to suggest that they will not enforce those directors' duties in that direction.
	Finally, there is a danger that new clause 4 works against the interests of existing directors who are concerned with corporate social responsibility. The reason for that is that, in practice, those who are vulnerable to being sued for breach of directors' duties are not those who act only according to the narrow interests of the company—its profits. Instead, they are those who attempt to look more broadly, taking into account the environment and the wider community of employees. On a takeover or liquidation, there is a danger that those who act for the creditors or new owners will sue the old directors for failing to make enough money, and for taking other interests into account. In a way, that is an answer to the question asked by the right hon. Member for Wokingham (Mr. Redwood). Clause 173 achieves extra protection for directors who have had regard to environmental matters and the community, and puts them in a position where they cannot be sued.
	We all have experience of that. The existing law mentions the interests of employees, and there have been examples of directors being sued for taking into account the interests of employees, failing to sell the business to the highest bidder, and instead selling it to a bidder whom they thought would carry on the business to the benefit of employees' jobs, not asset-strip the company. That is a practical matter, and whereas clause 173 offers extra protection, I fear that the new clause reduces that protection.

Patrick Hall: May I remind the hon. Gentleman that he made the point clearly in Committee that such actions cannot proceed unless the loss can be attributed to failing to fulfil those secondary duties? Does he now feel that that would be possible? He did not seem to be convinced in Committee.

David Howarth: The example that occurred in practice was precisely an attempt to sue a director for selling a business at less than maximum value. In that example, a director needs the protection of the new law and is not threatened by it at all. My point was therefore that directors are not threatened by the new law, as the hon. Member for Huntingdon was saying, because the only examples of a loss would be where a company could be said to have made a financial loss as a result of taking into account wider interests. In those circumstances, and only in that direction, directors might be vulnerable to personal actions. That is why I said in Committee that clause 173 was a deregulatory clause that protects directors from actions that might otherwise be brought against them.
	A problem with the new clause is that if the hon. Member for Bedford is right that the word "endeavour" makes it harder for directors to fulfil their duty than the words "have regard", in a way, that reduces directors' protection, as they will be less likely to be able to argue that they have fulfilled their duties under the law and cannot therefore be sued for what they did. I fear that that is an unintended effect of the new clause as drafted. The Government's existing proposal, because it might be slightly looser, is in practice more helpful for directors who want to do the right thing
	I now turn to the amendments tabled by the hon. Member for Huntingdon. Some are slightly puzzling, and one wonders why they are needed. Amendments Nos. 393 and 394 use subjective words and phrases such as "in good faith" or "relevant", but that subjectivity is already to be found in clause 173. In fact, the House of Lords changed the original draft to ensure that that subjectivity suffuses the clause as a whole, and one of the arguments about new clause 4 is that it renders part of clause 173 objective rather than subjective. Amendments Nos. 393 and 394 would not add anything to the Bill. They are merely confusing, as they throw into doubt how the start of clause 173 should be read.
	Similarly, why is amendment No. 392 needed? It talks about requiring directors to act appropriately for the size of a company, but that is implied in the duty already set out in clause 173, where directors are required to act in the way that they think would promote a company's success. If amendment No. 392 did serve to reduce the scope of the duty placed on directors, it would also have the unfortunate effect of reducing the scope of the protection to them offered by new clause 4, and so could be said to be objectionable on those grounds.
	Amendment No. 395 deals with common-law duties. The hon. Member for Huntingdon has said in the past that there are 640 or 650 of them, but there is some confusion in his approach. I have done some digging and discovered that many are simply examples of duties that are in the Bill, such as the duties not to exceed the powers of the company, or to act in accordance with the company's constitution, or to act with skill and care, and so on. Other examples are not, in the strict sense, directors' duties at all, as they are not duties to the company but duties to someone else, as set out in the wider environmental, employment or other law. The company law review team and the Law Commission have put years of work into these matters, and so it would be surprising for them to get the law as badly wrong as the hon. Member for Huntingdon suggests.
	Amendment No. 788 worries me a bit, as it proposes that the
	"duties implied by this section shall not apply to small and medium sized companies."
	First, I do not know what the word "implied" means in that context. It would usually refer to duties not mentioned elsewhere in the clause, but in this case it must refer to duties that are not mentioned but implied by the clause. I am not at all clear what is meant: if the amendment refers to all the duties in the clause, why does not the hon. Member for Huntingdon want the fundamental duty to promote the success of the company to apply to SMEs? That would make no sense, as that duty must apply to companies of all sizes.
	Perhaps the hon. Member for Huntingdon really means that the wider concerns that follow the words "have regard" in clause 173 should apply only to large companies. If so, the amendment would achieve only a reduction in the protection offered to directors of SMEs against the sort of legal action that I described earlier. I think that those directors of SMEs who follow corporate and social responsibility requirements closely are entitled to the same protection as are directors of large companies. Therefore, I do not understand what amendment No. 788 is getting at. It may be more of a symbolic gesture rather than something that the hon. Gentleman really wants to be agreed to.
	Finally, amendments Nos. 396 and 397 contradict one another, and both cannot be accepted. Amendment No. 396 states that no duty takes precedence over any other, whereas amendment No. 397 states that the duty to "promote success is paramount." Duties are either equal or unequal; they cannot be both. I hope that the hon. Member for Huntingdon is able to choose between the two alternatives that he offers.
	As it stands, and as all speakers have accepted, clause 173 means that the duty to promote the company's success is paramount, so there is no need to add what is proposed in amendment No. 397. The fact that amendment No. 396 would throw that priority into doubt is unfortunate, and I hope that the hon. Member for Huntingdon will not press it to a vote.

Jim Cousins: I shall be brief, and I shall start by speaking about the position adopted by my right hon. Friend the Minister. The right hon. Member for Suffolk, Coastal (Mr. Gummer) suggested that the architecture of clause 173 was an attempt to claw back what was lost when my right hon. Friend the Chancellor ditched the operating and financial review. If that is true, one has to say that she has not done too badly. Many who have attempted similar tasks in the past have not ended so well, as the right hon. Gentleman will admit. If, as he contends, my right hon. Friend has got the Government and the Chancellor out of a hole, she has survived to tell the tale. That puts her in a strong position.
	The hon. Member for Cambridge (David Howarth) was right to say that instead of trying to codify the 650 or so common-law rights accumulated since limited liability began, my right hon. Friend the Minister has set out some general principles. That effort is not an aggressive intrusion on the rights of directors, but an attempt to protect them. There is already a problem about the rights of directors and their treatment in the law. For example, the rising liability insurance costs for directors should send a signal to the House that the circumstances that obtain at present need to be set in a proper framework of principle that will protect directors and inform the discharge of their duty.

John Redwood: This has been a very short debate, but is it not clear that the Minister and the hon. Members for Bedford (Patrick Hall) and for Cambridge (David Howarth) have completely different views on how the principles at issue would be construed in a court? So a person like me, who brings an open mind to the matter and wonders whether the proposals would work, is left at a loss. The whole thing is very muddled—and I am left having to say as much in an intervention, as there will not even be time for me to speak in the debate.

Jim Cousins: The right hon. Gentleman deserves credit for trying to think clearly. Shortly, he will have to work out whether he should support his party's amendments, and I suspect that that will add to his confusion rather than diminish it.
	New clause 4 takes the principles set out in clause 173 and tries to make them clearer and more specific. The hon. Member for Cambridge drew attention to that part of the new clause that deals with the impact on the environment, but I believe that it would have precisely the opposite effect from the one that he set out. The new clause is much clearer about how directors should set out to protect the environment and is much to be preferred. Clause 173 makes a rather loose and general reference to the
	"impact of the company's operations on the community and the environment".
	The form of words proposed by my hon. Friend the Member for Bedford (Patrick Hall) is more specific and provides better guidance. Moreover, his criticism of the Conservative amendments was absolutely correct.
	I hope that the House will recognise that my right hon. Friend the Minister has taken on a difficult and complex matter, in circumstances that the House will agree were less than desirable from her point of view. She has made an excellent job of it. New clause 4 improves on that, and assists her in the work that she has attempted. I hope that the House will support it.

John Gummer: I do not think that producing a measure that is capable of so many different interpretations will solve the problem that has been caused by the Chancellor. I speak as someone who takes a strong view on this matter. I draw hon. Members' attention to my entry in the Register of Members' Interests. I advise a large number of companies on the subject of corporate responsibility. I prefer the term "corporate responsibility" to "corporate social responsibility" because the latter limits the coverage that companies ought to have.
	I am in favour, in principle, of companies having to present to their shareholders a proper account of their activities that covers not only their financial activities, but those that relate to the wider matters of corporate responsibility. I am in favour of that happening because it means that each company can talk about itself in its own way and satisfy those who listen to it in their own way. The trouble with the Minister's proposal is that it is so incomprehensible. Either it means a great deal, as some people say, or it means nothing at all compared with the present legal situation.
	New clause 4, similarly, is being interpreted either as a mere tightening up—a bit of an extension involving better wording—or as a dramatic alteration. I find this difficult to deal with because I, too, have read what the campaigners have written about the new clause. Frankly, if what they say is true, what the proposers of new clause 4 have said is not quite as true. Alternatively, if what the proposers of new clause 4 say is true, it does not quite explain some of the real difficulties that many of us—who are on the same side in terms of what we are trying to do—perceive in new clause 4. The hon. Member for Cambridge (David Howarth) rightly made that point earlier.
	Hon. Members would be wise not to go along with new clause 4, not on the basis that they take a view one way or the other on corporate responsibility or the mechanisms by which we should get companies to take these matters more seriously, but simply because if companies are being asked to do that, they must be clear about what they are expected to do. They must not be presented with wording that will have to be interpreted by the courts.
	One of the problems with the bipartisan approach that we try to take on environmental matters is that we often end up doing nothing. Everyone talks about it and the rhetoric is very good, but in the end nothing is done. The worst thing to do in such circumstances is to produce a measure that the courts are going to have to interpret. That is what worries me about this wording. It has been suggested that we should not be too mean to the Minister about this because everyone else who has tried to do something about it has been sacked. That is not a very good idea, if I may say so. The Minister has moved pretty rapidly from one job to another over the past few years, but that seems to be part of this Government's mechanism of keeping everyone in perpetual motion lest they begin to understand the issues that they are facing and start to worry about the fact that nothing is being done.
	Many of us who are pushing for a climate change Bill believe that we are going to have to do a great deal more, much more precisely and with real regulation that will actually work. If we are going to do that, however, we should not at the same time load people down with vague duties and bits and pieces that the courts will interpret. I would say to the Minister that if the Government are going to introduce the kind of environmental legislation that we desperately need to cut our carbon output and change our carbon footprint, we will have to ask people to do some very tough things. So far, the Government have avoided doing any of that. Instead, they have gone in for a kind of flim-flam. The trouble with this particular flim-flam is that it will have to be interpreted by the courts, and we do not know what the outcome will be. Worse still, decent directors who try to understand this legislation will find themselves at odds with the courts. The Minister has put us in a pretty difficult position already with clause 173. I hope that she will satisfactorily defend it against new clause 4, on the basis that that is even worse, but I do wish that she would get down to some practical, direct and real environmental legislation so that we would know where we were, rather than presenting us with these measures as part of a propaganda proposition to try to get the Chancellor off the hook.

Michael Weir: I am pleased to be able to make a short contribution to the debate. I was pleased to hear the hon. Member for Bedford (Patrick Hall) say that his new clause was pro-business. It is important for all of us that our companies should continue to be successful. However, the world is changing and—as the right hon. Member for Suffolk, Coastal (Mr. Gummer) rightly said—we are all now much more concerned about the environment and climate change. Companies are going to have to change along with that.
	The hon. Member for Portsmouth, North (Sarah McCarthy-Fry) made the point that there is a philosophical argument involved. To whom does a company owe a responsibility? Is it, as the existing law states, only to its shareholders? Incidentally, those shareholders tend these days to be other big companies or institutional investors, which creates a kind of circle. That is where the idea of enlightened environmental shareholder action begins to fall down. Other big companies control each big company, so unless all of them have an interest in doing something about the environment, I do not think that we would get very far.
	To whom does a company owe a duty? Traditionally, it has been purely to its shareholders—but in the changing world in which we live, where we need to tackle climate change, companies must also owe a duty to the wider society, as the right hon. Member for Suffolk, Coastal rightly said. New clause 4 would point directors along the route of thinking about their duties towards the community and the environment.

David Howarth: The hon. Gentleman was talking about a company's duties. However, he then switched to talking about directors' duties. This provision is about directors' duties. Companies may have broad duties under environmental law, but this is about directors' duties to the company.

Michael Weir: I am well aware of that, but the directors are the controlling mind of the company. I think that the hon. Gentleman is being a bit nit-picking.
	Companies will have to change the way in which they interact with communities and with the general environment. The point was made earlier—by a Conservative Member, I think—that there might be a need to change audit procedures if some of these proposals were to be agreed. I believe that companies will have to change anyway, and that they should be thinking now about how they will change their audit procedures in order to assess the carbon footprint of the company, and to determine how the company impacts on the environment. We had a debate in the House yesterday on the Liberal Democrats' proposals for green taxation, and I understand that the Conservatives have also been considering proposals for environmental taxes. The logical extension of that is that if we are going down the route of taxing companies on their environmental performance rather than purely on their income, new procedures will have to be imposed on every company in order to work out its environmental impact. The audit procedures will therefore have to be looked at in any event.
	The point was also made about the impact of citizens on companies in relation to green and ethical funds. However, if we are serious about introducing the substantial changes that we need to tackle global warming and environmental change, all companies will need to be green and ethical. We should not be looking at separate funds in that regard. All companies should adopt such policies. The whole point of this exercise is to achieve a level playing field, with all companies operating on the same level and considering seriously their community and environmental responsibilities. That has to be done.
	The impact of the provision on smaller companies was discussed. The hon. Member for Huntingdon (Mr. Djanogly) claimed that the provisions would affect everyone from the corner shop to the corporation. It is a long time since I practised law, but in my experience most corner shops are not companies, but sole traders or partnerships. I am trying to remember the exact procedure that he used, but I believe that, in the last Budget, the Chancellor took measures to try make small partnerships and sole traders desist from incorporating to avoid taxation.
	Let as look at what is already provided for in clause 173 and consider each subsection in turn. Subsection (a) deals with
	"the likely consequences of any decision in the long term".
	Any company that does not consider the long-term consequences of a decision is barking mad, because it will affect the future of the company. However, some businesses might look to short-term profit rather than long-term need, so the provision will make sure that companies consider the consequences of their actions. A small company or sole trader will of course think about the long-term consequence of any action, otherwise they would not have a business.
	Subsection (b) deals with
	"the interests of the company's employees".
	In a small business, the employer is likely to know all the employees, and that is more important. Subsection (c) deals with
	"the need to foster the company's business relationships with suppliers, customers and others",
	but in a small business, the chances are that the employer is the sole buyer in the company. Subsection (d) deals with
	"the impact of the company's operations on the community and the environment".
	A small company's business operates in the community, so the employer would consider it. Subsection (e) deals with
	"the desirability of the company maintaining a reputation for high standards of business conduct".
	That is more important for small businesses than it has ever been. A large, multinational oil company might get away with dubious practices, but a small business in a local community is most unlikely to do so. Subsection (f) deals with
	"the need to act fairly as between members of the company."
	For a sole trader, it is hardly likely to come to that. Many of those duties are already observed by good companies, but the argument about the level playing field is important because we must move forward.
	Today, we have learned in a report that we must cut our emissions by 90 per cent. if we are to stop climate change and have a planet on which to live. We cannot do that as individuals, no matter how many low-voltage light-bulbs we use, and no matter whether we have windmills on our roofs. That will not bring about changes in emissions. Companies must be part of the process, and to ensure that that is the case, we must change the culture of companies. Neither clause 173 nor new clause 4 goes far enough, but they are a step in the right direction. I must tell the Minister that although the provisions do not go far enough, they are an improvement. They will make companies start to think about what they have to do. I prefer new clause 4 because it goes slightly further, but there is more to do, and companies should take that on board.

Margaret Hodge: This has been an extremely good debate. I thank Labour Members, especially my hon. Friends the Members for Bedford (Patrick Hall), for Portsmouth, North (Sarah McCarthy-Fry) and for Newcastle upon Tyne, Central (Jim Cousins), for their generous welcome of the provision, and I note their wish that it went a little further. I also appreciate the welcome that the hon. Member for Angus (Mr. Weir) gave the measures. It is a shame that I must once again draw the House's attention to the fact that, although Opposition Members said that they wished to debate the issues in detail, for most of the debate the right hon. Member for Suffolk, Coastal (Mr. Gummer)—I welcome his contribution—has been the only Opposition Member present in the Chamber. There have been more Members from the minority parties than from the Conservative party, even though it was Conservative Members who resisted the programme motion so vigorously.
	Clause 173 heralds and articulates a radical, historic and vital cultural change in the way in which companies conduct their business—a change that the Government enthusiastically promote in the Bill. In the past, business success in the interests of shareholders has been thought to be in conflict with society's aspirations for people who work in the company or in supply chain companies, the long-term well-being of the community and the protection of the environment. The Government challenge that view. We think that the two purposes are complementary, not contradictory.
	We believe that businesses perform better, and are more sustainable in the long term, when they have regard to a wider group of issues in pursuing success. That was the premise behind the contribution made by my hon. Friend the Member for Portsmouth, North. We are not alone in holding that view: a number of Members have said that the best British companies conduct their business responsibly because, having exercised reasonable care and skill, they judge in good faith that that is the best way to promote business success.
	We are backing Britain's businesses, which regard the Bill as the future. Good businesses understand the purpose of good law—and the Bill is good law. We are setting out in legislation a director's duty to her or his company. We are laying out the issues that we expect quoted companies to cover in their business review, and we are ensuring that quoted companies will be held to better account by their shareholders—particularly indirect shareholders, such as those of us who have investments in pension funds or personal equity plans. We are making information more readily available, we are making it easier for indirect shareholders to exercise a vote, and we are ensuring that directors can be held to account for their actions. In doing all those things, we are setting in place a framework—not rigid prescriptive action—that will support companies and enable them to be both successful in business and responsible to their communities and work force. Our new framework is not burdensome, as Opposition Members have suggested, nor is it destructive. It will help to stimulate changes in market behaviour.
	Clause 173 sets out the first part of the framework, codifying in law a director's duties to his or her company. That is simply a common-sense approach that reflects a modern view of the way in which businesses operate in the real world: they interact with customers and suppliers; they make sure that employees are motivated and properly rewarded; and they think about their impact on communities and the environment. They do so at least partly because it makes good business sense.
	Directors' duties evolve as times change and as societal norms are transformed. When I first became involved with concepts of corporate social responsibility some 25 years ago, our main concern was to encourage companies to employ people who suffered discrimination in the labour market on the grounds of their race, gender or sexuality. Today, it is customers who increasingly care about whether employees have been mistreated or whether the environment has been damaged. That is why the sale of Fairtrade and organic products has increased so sharply in recent years.
	I entirely understand and appreciate that some Members want us to go further, but I encourage them to be patient. We have all seen corporate social responsibility develop and evolve over time. Many practices that are initially controversial quickly become common and then widespread. The relationship between business interests and the wider world is changing all the time—I believe for the better. The best way of achieving lasting cultural change is to go with the tide and the broad consensus of opinion.
	New clause 4 would amend the subsection by inserting "endeavour to" in place of "have regard to" and, I am afraid, it would paint the list of factors in more pluralist colours. One of our key aims in the clause is to make the law clearer and more accessible. Directors must be clear about their objective, but the wording of the new clause would point directors towards two different goals. Directors are still required to promote the success of the company for the benefit of its members as a whole, but the new clause would require them to endeavour to promote the interests of the company's employees, too, and to minimise any adverse impact of the company's operations on the community and the environment.
	The Government believe that our enlightened shareholder value approach will be mutually beneficial to business and society. We do not, however, claim that the interests of the company and of its employees will always be identical; regrettably, it will sometimes be necessary, for example, to lay off staff. The drafting of the clause must therefore clearly point directors towards their overarching objective. We have made it clear that clause 173 will make a difference, and a very important difference.
	To help my hon. Friend the Member for Bedford (Patrick Hall) I must explain that the words "have regard to"—mean "think about"; they are absolutely not about just ticking boxes. If "thinking about" leads to the conclusion, as we believe it will in many cases, that the proper course is to act positively to achieve the objectives in the clause, that will be what the director's duty is. In other words "have regard to" means "give proper consideration to". I hope that comforts my hon. Friend.
	Consideration of the factors will be an integral part of the duty to promote the success of the company for the benefit of its members as a whole. The clause makes it clear that a director is to have regard to the factors in fulfilling that duty. The decisions taken by a director and the weight given to the factors will continue to be a matter for his good faith judgment. I hope that, on that basis, my hon. Friend will agree to withdraw his new clause.
	Many of the Opposition's amendments were discussed in Committee. In my view, I am afraid that they row back from the good progress that we have made in marrying success for enterprise and business with sustainability and social justice. A lot of people have said, "Stop talking, start acting." The time has come for the Opposition to say whether they mean what they say and to show that in their votes. They do not dare, quite, to oppose us lock, stock and barrel—we will see what happens tonight—because that would unmask their continuing true hostility to the socially and environmentally responsible agenda that we are laying out and that most people in Britain today want. But they are trying in their amendments, which were discussed in Committee, to weaken and neutralise the impact of our proposals on the way in which businesses conduct their activities. I would have greater respect for the Opposition if they were honest about their principles. Do they want untrammelled, short-term, laissez-faire business behaviour that damages society or not? If not, they should vote with us.
	I know that hon. Members wish to talk about other issues tonight, so I will not deal with all the Opposition amendments in detail. Those hon. Members who are interested in the amendments can look at the record of our Committee proceedings, because most of the issues were dealt with then. I will just say that I do not believe from tonight's debate that Opposition Front Benchers believe in enlightened shareholder value, whereas we do. Everything that they have said continues to suggest that they see business prosperity, caring for the environment and looking after employees as pointing in different directions. We emphatically do not see it that way. Successful businesses do not see it that way. Successful businesses know that the world has changed and that they need to change with it. They know that the world will change further—and so will they. I hope that, on that basis, the House will agree that clause 173 as it stands is right and should be supported without any of the amendments that we have discussed this afternoon.

Patrick Hall: We have had an instructive debate on some important matters, and I am pleased that some finely balanced judgments have been placed on record. I listened carefully to the carefully chosen words of my right hon. Friend the Minister for Industry and the Regions. All that I want to see is that the secondary duties in clause 173 are taken seriously and cannot lightly be dismissed. I think that she has gone as far as she reasonably can today. Progress is being made, in my judgment, and I do not wish, by calling a vote on these matters now, to risk provoking the Conservatives in another place into reintroducing the damaging position that they took last May. Therefore, I beg to ask leave to withdraw the motion.
	 Motion and clause, by leave, withdrawn.

Clause 171
	 — 
	Scope and nature of general duties

Jonathan Djanogly: I beg to move amendment No. 389, in page 78, line 23, leave out subsection (3).

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments:
	No. 390, in page 78, line 24, leave out from 'directors' to end of line 25.
	No. 391, line 26, leave out subsection (4).
	No. 399, in page 79, line 36, clause 176, after 'must', insert 'take all reasonable steps to'.
	No. 400, line 37, leave out ', or possibly may conflict,'.
	No. 401, line 38, at end insert
	'at the time when he seeks authorisation pursuant to subsection (5) below.'.
	No. 402, in page 80, line 4, leave out paragraph (a) and insert—
	'(a) if the director reasonably and in good faith believes the situation is not likely to give rise to a conflict of interest; or'.
	No. 403, line 14, at end insert—
	'(5A) The authorisation may, in either case, be given by them (unconditionally, or subject to such conditions or limitations as they may specify), either in relation to a particular matter or generally, following receipt by them of a general notice in accordance with section 183.'.
	No. 404, line 22, at end insert—
	'(8) Where a conflict or potential conflict arises because of multiple directorships, the duty is not infringed if the director ensures there is no disadvantage to the interests of the company.'.

Jonathan Djanogly: Given the lack of time, due not least to the way in which today has been arranged, I will simply say that we will seek to press amendment No. 402 to a Division and move directly to speak to it.
	The amendment allows directors to exercise their subjective judgment about whether a situation is likely to give rise to a conflict. We should be showing UK company directors that we have faith in their judgment—a course that the Government do not seem keen to follow in this instance. The Government said in Committee that the amendment watered down the obligations on directors and endangered members, but it should be seen as a flexible, forward-looking approach that benefits companies.

David Howarth: Does the hon. Gentleman accept that one of the advantages of amendment No. 402, and one of the reasons why I support it, is that it reintroduces into the law the concept of good faith and honesty, which is surprisingly missing from the Government's present draft?

Jonathan Djanogly: The hon. Gentleman makes an important point, which I accept. The Law Society, among others, has pointed out that there is a significant difference between the common-law rule on conflicts of interest and the wording of the clause. Notably, the common- law rule maintains a negative position, whereas the clause imposes a positive duty. While the Government deny that that is so, it seems to be a widely held belief among stakeholders. The fact that the clause now gives rise to a positive duty is a key concern that many stakeholders have raised. The fear is that that positive duty might impact on a director's ability to assume multiple directorships, which are a feature of the UK company system and provide a number of benefits to companies of all sizes.
	We believe that it will be more difficult for directors to hold multiple directorships, which could affect the pool of non-executive directors. That is of particular concern to the private equity and venture capital industries.

Mike O'Brien: The amendment does deal with directors' conflicts of interest. Our aim is that directors should seek to avoid conflicts of interest, which do arise and need to be dealt with in a reasonable and balanced way. If they arise, the interests of the company must come first. The current law is strict. We want to put in place a statutory structure that enables the interests of the company to be closely balanced with those of the director so that people may have, in particular circumstances, multiple directorships. But it has to be clear that the interests of the various companies of which they are directors are taken into account.
	Through the amendments—particularly amendment No. 402—the Conservatives are starting to water down the balanced safeguards that we have provided for shareholders.

David Howarth: Will the Solicitor-General give way?

Mike O'Brien: I regret that I cannot give way because of the time. I apologise.
	We have provided for shareholders and companies to be able to look after their interests. If directors have created a conflict—in some cases they will not be aware that the conflict is about to arise, but in the case of multiple directorships it is possible that they will be aware—they must resolve that conflict and the company's interests must come first. It is important that, in order to give greater protection and to safeguard the interests of shareholders, investors and the companies themselves, we do not give discretion to directors to the extent that the Conservatives propose. We have to constrain it; we have to ensure a balance. We believe that we have got that balance right; we believe that we should stick to it.

David Howarth: The point that I wanted to make was that amendment No. 402 tightens the law by adding the requirement of honesty. That is what is missing from the present draft. However, if the Conservatives were to press their amendment on multiple directorships, I would vote with the Government and oppose it.
	 Amendment negatived.
	 It being Seven o'clock, Mr. Deputy Speaker  put forthwith the Questions necessary for the disposal of the business to be concluded at that hour, pursuant to Order [this day].

Clause 176
	 — 
	Duty to avoid conflicts of interest

Amendment proposed: No. 402, in page 80, line 4, leave out paragraph (a) and insert—
	'(a) if the director reasonably and in good faith believes the situation is not likely to give rise to a conflict of interest; or'.— [Mr. Djanogly.]
	 Question put, That the amendment be made:—
	 The House divided: Ayes 210, Noes 305.

Question accordingly negatived.

Clause 182
	 — 
	Modification of provisions in relation to charitable companies

Amendment made: No. 162, in page 83, line 11, leave out 'Company Law Reform' and insert 'Companies'.— [Margaret Hodge.]

New Clause 72
	 — 
	Loans to directors: requirement of members' approval

'(1) A company may not—
	(a) make a loan to a director of the company or of its holding company, or
	(b) give a guarantee or provide security in connection with a loan made by any person to such a director,
	unless the transaction has been approved by a resolution of the members of the company.
	(2) If the director is a director of the company's holding company, the transaction must also have been approved by a resolution of the members of the holding company.
	(3) A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (4) is made available to members—
	(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
	(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
	(i) at the company's registered office for not less than 15 days ending with the date of the meeting, and
	(ii) at the meeting itself.
	(4) The matters to be disclosed are—
	(a) the nature of the transaction,
	(b) the amount of the loan and the purpose for which it is required, and
	(c) the extent of the company's liability under any transaction connected with the loan.
	(5) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'.— [Margaret Hodge.]
	 Brought up, and read the First time.

Margaret Hodge: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following:
	Government new clause 73— Quasi-loans to directors: requirement of members' approval.
	Government new clause 74— Loans or quasi-loans to persons connected with directors: requirement of members' approval.
	Amendment No. 757, in page 86, line 4 [Clause 189], at end insert—
	'(2A) A company may not agree to such a provision unless it has consulted its employees.'.
	Government amendment No. 591.
	Amendment No. 19, in page 87, line 17 [Clause 191], at end insert
	'or must be conditional on such approval being obtained'.
	Government amendments Nos. 592 and 593.
	Amendment No. 405, in page 91, line 22 [Clause 200], after 'A', insert, 'relevant'.
	Amendment No. 406, in page 92, line 14, at end insert—
	'(6) "Relevant company" means a company which—
	(a) is a public company, or
	(b) is a subsidiary of a public company, or
	(c) is a subsidiary of a company which has another subsidiary a public company, or
	(d) has a subsidiary which is a public company.'.
	Government amendments Nos. 594 to 597.
	Amendment No. 20, in page 94, line 4 [Clause 204], after second 'company', insert 'or of its associated company'.
	Government amendment No. 598
	Amendment No. 21, in page 94, line 8 [Clause 204], after 'company', insert
	'or where a company is permitted to give a director a qualifying third party indemnity'.
	Amendment No. 354, in page 94, line 8 [Clause 204], after 'company', insert 'or any associated company'.
	Government amendments Nos. 613, 163, 164, 599 to 611, 644 and 612.

Margaret Hodge: Chapter 4 of part 10 is designed to deal with situations in which there is a requirement for prior shareholder authorisation, because a director has a conflict of interest. The chapter replaces provisions of part 10 of the Companies Act 1985 with ones that will be more accessible and more consistent. It also implements various recommendations of the Law Commission and the company law review.
	I turn first to loans, quasi-loans and credit transactions. The Bill makes a major deregulatory change to the regime that applies to loans and other similar transactions made by a company for its directors. At the moment, such transactions are prohibited unless certain exceptions apply. The Bill replaces that prohibition with a requirement for member approval.
	The Bill was drafted to implement the Law Commission's recommendation that all the rules on loans, quasi-loans and credit transactions for directors should extend to all companies. That would increase regulation for most private companies, as many of the current rules apply only to relevant companies. In broad terms, relevant companies are public companies and private companies that are in the same group as a public company.
	Although that recommendation was endorsed by the company law review, we have carried out further informal consultation in the light of the discussion in Committee. Stakeholders clearly supported the proposal that the requirements that currently apply only to relevant companies should not be extended to all private companies. Government new clauses 72, 73 and 74 and Government amendments Nos. 592 to 597, 599 and 601 to 612 will make the relevant changes to the Bill.
	Amendments Nos. 405 and 406, tabled by the hon. Member for Huntingdon (Mr. Djanogly), relate only to the rules on credit transactions and would retain the increase in regulation for loans and quasi-loans. We believe that it would be better to remove that additional regulation. Therefore, under the Government amendments, the Bill will no longer apply the rules on credit transactions or quasi-loans to private companies, unless they are associated with a public company, or apply the rules on loans, quasi-loans and credit transactions with persons connected to a director to private companies, unless they are associated with a public company. Unlike in those Opposition amendments, we have not gone back to the concept of "Relevant company", as that added to the complexity of the current law. Instead, Government amendments use the concept of "associated company", which creates consistency with the rest of this part of the Bill. The rules that currently apply only to relevant companies will, under these amendments, apply only to public companies, and to any private company associated with a public company.

Jim Cousins: I am following my right hon. Friend's arguments on these complex issues as closely as I can under the circumstances. Can she tell me whether, in light of the statement that she has just made, the new clause on quasi-loans would apply to special private-finance-initiative-vehicle companies? Also, does the watering down of the Bill that she has just outlined mean that, for example, the company taking over Thames Water Utilities, which is a foreign bank in a consortium of private equity companies, could be in a format to which the clauses under discussion would not apply? If that were the case, it would cause me considerable concern.

Margaret Hodge: I will be happy to write to my hon. Friend when I have looked at  Hansard in detail. If the company to which he refers is incorporated abroad rather than in the United Kingdom, it will not be subject to UK company legislation. On the PFI issue, that depends on the kind of company to which he refers. If it is a public company, it will be covered; there will not be deregulation. But if it is a private company, there will be. Perhaps my hon. Friend would like to write to me, or alternatively, after I have looked at  Hansard, I will write to him in greater detail, if that will be helpful to him.
	I now turn to the issue of exceptions to the rules. We recognise that, in a group situation, it might be more convenient for the loan to be made by a different company in the group. Therefore, amendments Nos. 598 and 600 make it possible for a loan under the exceptions in clauses 204 and 205 to be used by a director to fund their defence in proceedings relating not just to the company, but to any associated companies. Amendments Nos. 598 and 600 achieve the same result as Opposition amendment No. 354, but create consistency by going further and widening the exception in clause 205 in the same way—for example, to actions that the Financial Services Authority might take.
	We do not accept Opposition amendments Nos. 20 and 21. They would widen the exception much further. In particular, amendment No. 21 makes the exception available whenever the company would be permitted by clause 234 to give the director a qualifying third-party indemnity. Let me give an example of the sort of thing that would happen if that were the case. Without shareholder approval, a company could give a loan to a director to defend herself or himself in matters such as driving fines or offences. That would be inappropriate.
	Under the Companies Act 1985, it is currently the case that the prohibition on loans to directors goes much further than the restrictions on the indemnities that may be given in respect of a director. It is possible at present to give an indemnity in circumstances where a loan would be prohibited. It is important that there is some limit on the types of proceedings for which loans may be given to a director under clauses 204 and 205. Companies should not use those exceptions to make loans without member approval for matters that, in reality, have nothing to do with the company. The sums involved under these clauses could be significant, and the exceptions do not contain any financial limits. Given that, it is right that the exceptions should be used only for matters that are properly connected to the company. It would be inappropriate for the exceptions to be available for company funds to be used without member approval to defend a director against proceedings unconnected with company business.
	The Bill has already significantly relaxed the regime applying to loans by replacing the outright prohibition with a requirement for member approval. These clauses create exceptions where not even member approval is required. In order to provide worthwhile protection to members, it is important that those exceptions are sensible in their scope. We do not agree that there is any need to widen the exceptions even further, thus reducing the need for shareholder approvals.
	Amendment No. 613 makes a minor drafting improvement to clause 204, following comments made to us by the Law Society. It is designed to follow more closely the wording used in section 337A of the Companies Act 1985. It is intended to make it clear that clause 204(2) does not make any substantive changes to the current law.
	I now turn to substantial property transactions. Clause 191 implements a recommendation of the Law Commissions that has been widely welcomed, by allowing companies to enter into agreements that are conditional on the approval of the members of the company being obtained. Amendment No. 591 goes one step further, allowing the agreement to be conditional on approval from the members of its holding company as well, in those cases where the approval of the members of the holding company is required. That amendment responds to concerns that companies could be inconvenienced if they had to wait for member approvals before they could agree to a substantial property transaction. Opposition amendment No. 19 would achieve the same result.
	Amendment No. 644 deletes clause 223 because the provision made by that clause will now be included in clause 288, and applied not just for the purposes of part 10 of the Bill but for the entire Companies Acts. As a result of the restatement exercise, amendments Nos. 163 and 164 replace references to the Companies Act 1985 with a reference to the relevant bit of the Bill.
	Amendment No. 757 on the compulsory consultation with employees on directors' service contracts was tabled by my hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins). I am sorry to tell him that, despite my best endeavours, we cannot support his approach. As he will appreciate, company law is about the relationship between the company, its members and the directors, and the directors should be accountable to the shareholders rather than to employees. However, as he knows, we do entirely agree that companies should be sensitive to pay and employment conditions elsewhere in the group when taking decisions about directors' remuneration. Indeed, the combined code has a supporting principle that the remuneration committee should be
	"sensitive to pay and employment conditions elsewhere in the group, especially when determining annual salary increases".
	I hope that, with that explanation, the House can agree to these uncontentious Government new clauses and amendments.

Jonathan Djanogly: We now move on to a patchwork of technical clauses, and I shall address them in the order in which they appear on the selection list.
	We find Government new clauses 72, 73 and 74 to be uncontentious. Amendment No. 757, tabled by the hon. Member for Newcastle upon Tyne, Central (Jim Cousins), is an interesting proposal. I believe that he is suggesting that a company should not approve long-term service contracts by a shareholder vote unless members are previously consulted. That has to be looked at in the context of different types of company. If we are talking about a small company—a family company, for example—it is unrealistic, because the length of the service contract is, in reality, unimportant: an owner-manager effectively has a service contract for ever, simply because he does not need a service contract as he is the owner of the company, and he would therefore have one for as short or as long as he wanted, until he sold or closed his business.
	The matter is more pertinent to larger companies. It was considered by the Higgs review with regard to corporate governance. The problem that we have with the amendment is that employees are likely to be biased just as much as other directors. Under the combined code, listed companies will have a nominations committee of independent non-executive directors, which will undertake appointments, and a remuneration committee, which will review service terms. The independence of the bodies means that they should not be on the side of the executive directors or the employees.
	Institutions also take a great interest in the matter. The combined code provides for a maximum recommended service term of one year, which is generally a move in the right direction. If a company puts in for a longer term of service, it will invariably be the case that the institutions will want a full explanation. There are thus controls in place to address the matters with which the hon. Gentleman's amendment deals, but tabling it was worthwhile because it has allowed our debate to be put on record. We will not be able to support amendment No. 757.
	As the Minister noted, Government amendment No. 591 is almost identical to amendment No. 19, which we tabled. Our amendment was inspired by the Law Society and would bring the provisions of clause 191(2) in line with subsection (1) of the clause. We are happy to go along with the Minister's proposal on substantial property transactions.
	Amendments Nos. 405 and 406 would amend clause 200. Although the clause replicates a provision of the Companies Act 1985, it also permits certain credit transactions that were completely prohibited by section 330 of that Act to be approved by members. Clause 200 applies to all companies, rather than public companies under the 1985 Act. Under the clause, private companies that had been able to enter into such a credit transaction will have to obtain member approval.
	Although we realised that the provision was a recommendation of the company law review, it flew in the face of the deregulatory spirit of the Bill. When we asked the Minister for Industry and the Regions in Committee why private companies were being dragged into the net of requiring shareholder consent, she replied with a letter in which she pointed out that the provision followed the Law Commission's recommendations that restrictions on a company's power to make loans to directors and persons connected with them should apply to all companies. However, just as we were about to give up hope on this, we heard only last week that the Government had changed their mind. I thus welcome Government amendments Nos. 592 and 593. It all goes to show that the Bill continues to be something of a moving feast— [ Interruption. ] Well, a feast of some sort anyway, as my hon. Friend the Member for Reigate (Mr. Blunt) suggests.
	The Minister said that the Government would reject amendment No. 20. Again, the amendment came from the Law Society. The insertion of the phrase "or any associated company" would enable a company, without the need for shareholder approval, to make a loan to a director to enable him to defend proceedings in connection with any alleged negligence or breach of duty in relation to an associated company.
	Clause 204 substantially narrows the existing provision on the funding of a director's expenditure on defending proceedings that is contained in section 337A of the 1985 Act. In the view of the Law Society, the clause is too restrictive, and it also points out that there has been no public consultation on the proposed change. The reference to "the company" in subsection (1)(a)(i) does not even extend to the company's holding company, which is curious given that the clause contemplates a loan being made to a director of the company's holding company, but only to defend proceedings in relation to the company. That is illogical.
	The Law Society's view is that subsection (1)(a)(i) should at the very least refer to the company or its holding company, and that it would be preferable if it referred to the company or any associated company. Otherwise, if a person is a director of more than one company in a group, each company will have to enter into a separate arrangement with that director, rather than one company being able to enter into an arrangement that covers all the relevant companies. That does not seem sensible. The term "associated company" is defined in clause 256. However, we note that Government amendment No. 598 addresses the problem, albeit with a different drafting approach. That amendment will be a popular move with directors who are in need of help from their companies.
	The Law Society also notes that the phrase
	"any liability of the company incurred in connection with the matter"
	in clause 204(2)(a) is potentially much wider than the wording in section 337A(4) of the 1985 Act, thus making the exception in the clause much narrower. The 1985 Act refers to:
	"any liability of the company under any transaction connected with the thing in question falling to be discharged".
	In other words, under section 337A(4), the requirement to discharge the liability relates to only the thing done to provide the director with the funds to meet the relevant expenditure, or to avoid incurring it, whereas, under clause 204, the words
	"in connection with the matter"
	do not clearly relate back to the words
	"anything done by a company"
	in subsection (1), and could thus refer to the entire circumstances of the liability or alleged liability. The Law Society thinks that the wording used in section 337A(4) is clearer and should be retained. Government amendment No. 613 effectively deals with the problem that the Law Society has identified, so I think that we have made progress.
	Government amendments Nos. 163 and 164 are uncontroversial, as are Government amendments Nos. 599 to 611. However, I would be grateful if the Minister could provide further explanation of Government amendment No. 644, which will delete clause 223, which relates to resolutions.

David Howarth: I do not want to detain the House by going through the amendments one by one. I am happy to go along with the approach proposed by the Government, but I would not want to go too far down the line on which have started because of the underlying reason why the regulations were set out in the first place. It is difficult for directors to borrow money from their companies because it is important to maintain the separateness of the fund that a company holds from its directors. That gives rise to a protection, not so much for shareholders, but for creditors, so that they can be assured that a company's assets are as they appear, rather than having been dissipated by being loaned out to people with a direct interest in the company. The deregulation of quasi-loans and credit transactions is not objectionable, but I would not like to give the impression that we would be happy to take a deregulatory route all the way down the line in this area.
	I will be interested to hear the argument of the hon. Member for Newcastle upon Tyne, Central (Jim Cousins) for amendment No. 757. I suspect that this is not the right time to discuss the consultation of employees and the wider question of industrial democracy, but he has a good point. We are in an era in which employees face increased precariousness in their employment experience, given that more and more people are in temporary or part-time employment—employment that is not a traditional permanent job. It is thus not helpful for directors to give themselves long contracts that amount to a tenure. At the very least, companies should think about the consequences for industrial relations and human relations of doing such a thing without first talking to their employees.

Jim Cousins: I speak to amendment No. 757 tabled by myself and my hon. Friends the Members for Great Grimsby (Mr. Mitchell) and for Hayes and Harlington (John McDonnell). It does not entirely surprise me that my right hon. Friend the Minister is unable to agree to it, but there is none the less recognition by the official spokespeople for all the main parties that it relates to a serious issue; I look forward with interest to the views of Plaid Cymru.
	In the past, the type of amendment that I propose would have been dismissed out of hand as something that would better belong to the North Korean "Down with Imperialism" day that has been playing on our television screens all afternoon. The matter is much more serious; we live in a society in which the divisions of wealth and power are probably greater than at any time in our history over the last 100 years. There is a proper market in the directing of companies—in corporate control—in which the company's employees are entitled to have some involvement.
	It is important to point out that my amendment does not say that directors' contracts and remuneration would have to have the approval of employees, merely that employees should be consulted, which is just about the weakest possible formulation of the proposal. However, the point is undeniable and has indeed not been denied from the Treasury Bench or from the Front Bench of the main Opposition party.
	The attempt to say that the issue can be dealt with entirely by remuneration committees is completely mistaken. Of course, my hon. Friends and I welcome the fact that there is more active consideration of such issues inside companies. We welcome the strengthening of the power of non-executive directors and the fact that remuneration committees are considering the issues, but the company's employees, whose employment experience is becoming less secure in today's flexible labour market, are entitled to have some right to the expression of an opinion about such matters and about the policies that might be involved in the appointment of directors, the extension of their contracts and their remuneration.
	During our debates on the Bill we may have missed an important moment, when for the first time a representative of British workers was elected to the supervisory board of a German company with a presence in the UK. That is an important moment in the extension of European ways to our wonderfully Anglo-Celtic system—as there is a representative of Plaid Cymru in the Chamber, I shall use that Australian term rather than the words "Anglo-Saxon". It reminds us that globalisation is a two-way traffic; there are new practices to learn about all around us.
	At present, the average annual pension of a director of a quoted company is said to be about £167,000. That is a fabulous figure. In the United States, there is increasing concern about how pension rights and stock options are exercised. In the UK, there has been a dramatic fall in final salary pension schemes for employees in the private sector, but there has been no such fall in final salary pension schemes for directors. Such inequity cannot survive. It will become a matter of public debate and public controversy, and the first and right place for that is within the confines of the company itself.
	Of course, at present there is no set way for a company to consult its employees, and our amendment does not attempt to specify one. However, that, too, is something a sensible company ought to consider; it should not require the intervention of laws and Governments to force a company to think about how to consult its employees on this or other matters. Perhaps the amendment will serve a purpose by reminding people, in the context of how we take decisions in companies, that companies must have some regard to the issue.

Austin Mitchell: My hon. Friend is becoming excessive in his moderation. Unless the law requires companies to take account of the views of their employees, it is difficult to see how those views are to be included. Our workers have fewer rights in their companies than those of any other European country. Other systems, such as the French and German ones, were decided by their Governments and imposed on the companies sector.

Jim Cousins: That is the case, and a future Government may have to consider the issues and impose a legal framework for the requirement to consult employees. It is entirely possible that that will be a secondary consequence of legislation passed by the European Parliament and the European Commission, but it would be much better if we were willing to debate the matter now, so that we could form our views before that time comes.
	The issues will not go away while the experience of workers is so drastically different and is growing increasingly different from that of the directors of the company, who form part of the extraordinary world in which new investment vehicles, such as private equity companies, are radically transforming even the things of which we speak. It is clearly right that employees have the right to express a view about their directors' remuneration and length of service. It would be entirely wrong for the House to put itself in the position of saying that it will leave the matter to others, in the European Parliament or the European Commission, to impose on us at a later date. We ought to be thinking it out for ourselves.

Margaret Hodge: I shall reply briefly as I know that Members are anxious to get on with other matters.
	The hon. Member for Huntingdon (Mr. Djanogly) asked why we were deleting clause 233, which is dealt with in our amendment No. 644. The provision made by the clause will be included elsewhere—in clause 288—as a result of amendment No. 643, and applies not only to part 10 but to the whole Bill.
	I hear what the hon. Member for Cambridge (David Howarth) says about the balance between deregulation and the proper conduct of directors in relation to taking loans. I hope that the balance is just about right in the propositions we have put to the House tonight.
	My hon. Friend the Member for Newcastle upon Tyne, Central (Jim Cousins) made a most eloquent contribution. I fully accept that the issue is important and that companies should be sensitive to the pay and employment conditions of their employees generally. In another place, we agreed to consult about the case for requiring quoted companies to show in the directors' remuneration report how they have had regard to employees. To that extent, there has been a little movement on something about which my hon. Friend expressed strong feelings in his contribution. I hope he can take heart from that.
	 Question put and agreed to.
	 Clause read a Second time, and added to the Bill.

New Clause 73
	 — 
	Quasi-loans to directors: requirement of members' approval

'(1) This section applies to a company if it is—
	(a) a public company, or
	(b) a company associated with a public company.
	(2) A company to which this section applies may not—
	(a) make a quasi-loan to a director of the company or of its holding company, or
	(b) give a guarantee or provide security in connection with a quasi-loan made by any person to such a director,
	unless the transaction has been approved by a resolution of the members of the company.
	(3) If the director is a director of the company's holding company, the transaction must also have been approved by a resolution of the members of the holding company.
	(4) A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (5) is made available to members—
	(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
	(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
	(i) at the company's registered office for not less than 15 days ending with the date of the meeting, and
	(ii) at the meeting itself.
	(5) The matters to be disclosed are—
	(a) the nature of the transaction,
	(b) the amount of the quasi-loan and the purpose for which it is required, and
	(c) the extent of the company's liability under any transaction connected with the quasi-loan.
	(5) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'.— [Margaret Hodge.]
	 Brought up, read the First and Second time, and added to the Bill.

New Clause 74
	 — 
	Loans or quasi-loans to persons connected with directors: requirement of members' approval

'(1) This section applies to a company if it is—
	(a) a public company, or
	(b) a company associated with a public company.
	(2) A company to which this section applies may not—
	(a) make a loan or quasi-loan to a person connected with a director of the company or of its holding company, or
	(b) give a guarantee or provide security in connection with a loan or quasi-loan made by any person to a person connected with such a director,
	unless the transaction has been approved by a resolution of the members of the company.
	(3) If the connected person is a person connected with a director of the company's holding company, the transaction must also have been approved by a resolution of the members of the holding company.
	(4) A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the matters mentioned in subsection (5) is made available to members—
	(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
	(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
	(i) at the company's registered office for not less than 15 days ending with the date of the meeting, and
	(ii) at the meeting itself.
	(5) The matters to be disclosed are—
	(a) the nature of the transaction,
	(b) the amount of the loan or quasi-loan and the purpose for which it is required, and
	(c) the extent of the company's liability under any transaction connected with the loan or quasi-loan.
	(6) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'.— [Margaret Hodge.]
	 Brought up, read the First and Second time, and added to the Bill.

Clause 155
	 — 
	Companies required to have at least one director who is a natural person

Austin Mitchell: I beg to move amendment No. 761, in page 71, line 10, at end insert 'and domiciled in the United Kingdom'.

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments:
	No. 762, in page 71, line 11, leave out subsection (2).
	No. 385, in page 72, line 8, leave out Clause 157.
	No. 386, in page 72, line 18 [Clause 157], leave out subsection (5).
	No. 387, in page 72 [Clause 158], leave out lines 30 and 31.
	No. 388, in page 73, line 12 [Clause 159], leave out 'ceases' and insert 'shall not cease'.
	Government amendments Nos. 715, 716, 770 and 717.

Austin Mitchell: The principles of amendments Nos. 761 and 762, which are in my name and those of my hon. Friends, are fairly clear. Up until now, we have been dealing with the duties of directors and companies. The problem is how we take account of those duties and how directors and companies can be made accountable. The purpose of our amendments is to strengthen accountability. Clause 155 is an improvement in the sense that now at least one of the directors has to be a real person. We want to take that a little further. Amendment No. 761 therefore provides that that one person shall be domiciled in the UK. That is an important principle to maintain. Amendment No. 762 strikes out the ability of corporate entities to be directors—something that is wrong in principle, confuses accountability and makes enforcement of any kind difficult.
	We need those two amendments because somebody needs to be accountable for what companies are doing. They need to be accountable under UK law and not living in a country that is perhaps a tax haven, or which has no extradition agreement or arrangements, and where UK law cannot be enforced. I am thinking, for instance, of countries such as that chosen by Asil Nadir—that was the nadir of enforcement—when Polly Peck collapsed. He fled to northern Cyprus and, strangely, for some reason he has refused to come back to this country and face the rigours of the law. We do not want that situation to be sustained. We need companies to be accountable. I am sure that the Opposition will support that principle in the sense that, in refusing to accept companies as directors of other companies and depriving them of that power, we are, in effect, reducing the red tape on companies.
	The principle is straightforward. There is a huge problem attendant on the ability of companies to escape accountability. It is because of that kind of escape from accountability that we have such problems with tax avoidance—problems involving companies and directors stationing themselves in tax havens. I am thinking of companies such as Mapley Steps, which has close relations with the Government. I am following every one of the 39 Mapley Steps adventures in  Private Eye. How do we enforce accountability on a company such as that, in a tax haven? How do we ensure that companies in tax havens fulfil their social responsibilities, pay their rent to society, and are responsible for the damage inflicted by the corporation under the law that we passed earlier? How do we ensure that they fulfil their responsibilities in relation to profits derived here? There is also the matter of criminal negligence. These two simple, straightforward amendments confront a simple issue.
	The Government want companies to be accountable and they want to deal with tax avoidance, tax havens and all the other issues involved in companies escaping their obligations in this country. I note that the United States Government Accountability Office, in a report on minimal ownership information, which came out earlier this year, said that the United States Government found it almost impossible to pursue many companies for criminal activity—not just for tax avoidance—because they could not trace the individual directors, who were often living in tax havens. I want to enforce the principle in the UK and make it possible for us to deal with all kinds of infringements from money laundering, financing of terrorism and tax avoidance to criminals operating through a shelf company. How will we deal with any of that unless we agree to the amendments? Our simple provision is that a real person—the one real person—should live in this country and that only real persons can be directors of a company. I hope that my right hon. Friend the Minister, with her usual acuity, will leap to accept it and say, "Yes boys, you're right. Right on! We're behind you."

Jonathan Djanogly: First, I will address amendment No. 761. The suggestion is that if a company has only one director, not only should they be a natural person, but they should be domiciled in the UK. In the UK, we pride ourselves on being an international centre for conducting business. The amendment would be a backwards step and would fly in the face of London as an international community. It will not have the support of the Conservative party.
	Government amendments Nos. 715, 716 and 717 deal with shadow directors. In Committee we explained the complex case law surrounding clause 168 and the difficulties in determining whether a person is a shadow director, including by making reference to the Ultraframe case of 2005. Hon. Members will be pleased, if not relieved, to hear that I do not intend to rerun that debate this evening. We recommended that the Government should recognise those complexities and remove the requirement for shadow directors' details to be entered on the relevant registers. In the light of that, the Government have reconsidered their position and tabled amendments Nos. 715, 716 and 717. That is welcome and we commend the Government on accepting our reasoned approach to this matter.
	Clause 157, which relates to the minimum age for directors, is one of the more regressive clauses in the Bill. It provides that people must be 16 to become directors. The answer to my written question of 31 January revealed that on 31 December last year there were 431 directors under the age of 16 in England and Wales and that 200 were under 10. I can envisage circumstances in which controlling family companies or trust arrangements from wills drafted many years ago would require that a child be appointed a director and that not to do so would involve losing assets or causing problems in respect of inheritance. In Committee, I raised the question of whether the Secretary of State would make an exception under clause 157 in those circumstances, which involve an individual rather than some class basis of individuals. Unfortunately, I did not receive a full answer in Committee. Perhaps the Minister will provide one this evening.
	Over the summer, the pages of the press seem to have been filled with stories of young entrepreneurs developing thriving and often profitable businesses. They include Fraser Doherty, who makes jam using his grandma's recipe, and who attacked the Government's attitude to young entrepreneurs, saying that the enterprise culture should start not in the boardroom, but in the classroom. On 7 October, the  Financial Times reported on a 15-year-old boy who founded a cosmetics company. I have heard of other successes, not least the teenager in my constituency who started up an online company selling shoes to people with big feet. He is doing very well, thank you very much.
	In Committee, we supported the proposition that under-16s who are currently directors should be able to remain directors after the implementation of the clause, but the Government rejected that. We have proposed it again in amendment No. 388. However, we have thought further about the clause over the summer, and we now want to make a stand in support of the innovating youth of our country by tabling amendment No. 385. This is what the modern Conservative party stands for: youth, innovation and entrepreneurial spirit. What sort of example does the fuddy-duddy Labour Government set by attacking innovative youngsters?
	That said, if the clause remains, my reading of subsection (5) suggests that a child who owned all the shares in a company—for example, a 14-year-old who had a bright idea and incorporated—and who appointed his parents as directors and told them what to do could, presumably, be treated as a shadow director. However, I am not sure that that follows logically. If the child is considered to be not old enough to take decisions as a director before he or she is 16, how can we say that the same child has the nous to act as a shadow director? Amendment No. 386 is designed to elicit clarification on that point. In Committee, the Minister responded to our argument by saying that really talented young entrepreneurs who direct businesses should be subject to criminal sanctions. We believe that we should support our youth and that there is merit in our amendment.
	I am not sure why the words,
	"The regulations may make different provision for different parts of the United Kingdom."
	remain in the Bill. Amendment No. 387 would delete them. We are considering UK corporate law, and the words seem inconsistent and illogical. The Minister's response in Committee was that the provision was there "in case", but I am still in the dark as to the Government's reasons. Perhaps the Minister will now enlighten me.

David Howarth: We are now faced with three different issues. The first was raised by the hon. Member for Great Grimsby (Mr. Mitchell), the second relates to the ability of under-16s to be directors, and the third is the Government amendments on shadow directors, which would make an important change to the way in which the Bill works.
	I am quite sympathetic to amendment No. 761, because there is sometimes a problem, as the hon. Gentleman said, of getting jurisdiction in respect of wrongdoing directors. I fear, however, that the means that he has adopted to achieve that end would not work, as to avoid the problem a company would need only to appoint someone innocent and poor to be their real person director, and all the nefarious people to whom the hon. Gentleman referred would remain offshore.

Austin Mitchell: The hon. Gentleman will agree that our amendment becomes even more necessary, given that we are to get rid of company secretaries.

David Howarth: The hon. Gentleman should hang around for a bit, as he might find that that is no longer the case. The Government appear to have changed their mind on that matter, and very glad we are about it, too.
	There is a problem with amendment No. 762. I do not think that what the hon. Gentleman said was correct. The problem relates to the concept of the corporation sole, which is not a sort of fish, but is largely a sort of bishop. Most corporations sole are traditional offices, such as the office of bishop, where the aim of the law is to separate the person who holds the office from the office itself. If one were to leave money to the Bishop of Ely, the question would be whether one left it to the bishopric—that is, the ongoing office of Bishop of Ely—or to the human being who holds that office for the time being. The two things are separate.
	The hon. Gentleman commented that it was more difficult to track down individuals who are office holders. It seems to me that precisely the opposite is true in the case that I have just outlined—that of the Bishop of Ely. It is quite easy to find the present Bishop of Ely: he is usually in his palace. It would, however, be quite difficult to find the former Bishops of Ely. If a company is set up in which a directorship is held by the Bishop of Ely as an office—that is, the corporation sole—accountability is far easier under the present arrangements than it would be if amendment No. 762 were passed and it was impossible to offer the directorship to the office of Bishop of Ely, with the result that the company had to keep changing the person to the new holder of the office. I see the hon. Gentleman's general point about office holders, but I am not entirely convinced that the amendment would work as he says it would, especially with regard to bishops.
	On the under-16s debate, I shall not detain the House by reciting my own list of young entrepreneurs, but I am sympathetic to the argument advanced by the hon. Member for Huntingdon (Mr. Djanogly). It is true that many young directors—those under 16—are directors by reason of family settlements: for example, their parents died younger than expected and the way in which the family settlement works requires them to count as a director. There is a worry that if we impose on directors, as we do in the Bill, a long series of onerous criminal law duties, it might not be sensible to expect very young children to meet those duties. On the other hand, the age of criminal responsibility is 10, not 16. I therefore wonder whether 16 is the correct age to cut off directorships and whether, in the light of the research that has been done into young people holding directorships and the evidence about young entrepreneurs, 16 might be thought to be too advanced an age for the cut-off point. Another age, less than 16, might be more appropriate.
	The transitional arrangements remain bothersome. I cannot see why the Bill should take the line of insisting that all existing under-age directors be cut off before their prime. A big issue in the Committee, to which I hope Ministers will give some thought, was the question whether we should allow existing under-16 directors to continue as directors—obviously, the situation would last no more than 16 years, and in most cases considerably less than that—rather than make the arrangements necessary to change directorships almost on the fly.

Austin Mitchell: It is good to see the Liberal propensity to sit on both sides of the fence given full exhibition by the hon. Gentleman, but if he is defending the rights of under-age directors, why does he not go the whole hog and give them the right to have experience down the mines or in textile factories, or to do all sorts of other manual labour that might amplify the joys of being under 16?

David Howarth: I am grateful for the hon. Gentleman's intervention, but he is confusing a duty with a right. We are not saying that it should be compulsory for under-16s to be directors, or that we would encourage it by legal force. Our argument is that in those cases where young people have set up their own business, it is not entirely wrong for them to have some sort of direction of the business. If they had taken a different approach—if they had set up the business and then asked someone else to run it for them, as the hon. Member for Huntingdon said—the law would treat them as directors anyway. They would end up being responsible, even though the starting point was that the law did not allow them to be directors. That is the point that the hon. Gentleman was trying to make about shadow directors. In the light of what the Government are doing about shadow directors, it seems to me that the provision in the Bill about young people being shadow directors could be justified, but only if the more general rule were changed.
	Government amendments Nos. 716, 770 and 717 deal mainly with whether there is an obligation on companies to register the existence of shadow directors. There is an issue of transparency—whether people who effectively run companies without officially running companies should in some way be registered by the company as people exercising that power. The problem is a practical one for companies—whether they can know whether particular people count as shadow directors, given the fact that the law is not very easy to apply, especially from the point of view of another company director. Courts might find it easy to apply, but companies might find it difficult.
	The history of the concept of shadow director is that it has been used by the courts to put liability on someone who deserves liability for actions that they have taken with regard to a company, perhaps without realising that they were directors. It is a remedial concept, rather than a real one. It is a construct of law that is used to achieve particular results. Because the concept is so artificial, it is going too far in practical terms to require companies to register shadow directors in such circumstances. Although there are problems with transparency in this area, on the balance of practicalities the amendments are acceptable.

John McDonnell: I support amendments Nos. 761 and 762. Reading clause 155, I was almost overjoyed when I saw the concession that the Government had made by requiring at least one director to be a natural person. I then read subsection (2) and for about two hours did not understand what it meant, because it is a masterpiece of drafting skills and obfuscation, the likes of which have not been seen for some time in the House. Nevertheless, on the basis of the interpretation offered by my hon. Friend the Member for Great Grimsby (Mr. Mitchell) that subsection (2) overrides subsection (1), we are back to the situation where a director of a company does not have to be a natural person—that is, a human being.
	The reason why my hon. Friend has pressed the issue for some time is that at some stage in the life of a company its responsibilities have to be borne by a human being. Last week we debated the Corporate Manslaughter and Corporate Homicide Bill. When we discussed how we held to account companies and individuals operating within those companies with regard to how they looked after the health and safety of their employees, a number of us pressed for specific reference to be made to the responsibilities of directors. We were informed that that was dealt with elsewhere as a result of various other pieces of legislation that apply to directors, and that there did not need to be a specific reference in the corporate manslaughter legislation.
	We find that the provision contradicts those assurances. We could have companies where no single director was responsible of the health and safety of their employees. A company could perpetrate actions that were so negligent that they resulted in the death of an employee, and no individual would be held responsible. That is one example to demonstrate why my hon. Friends have been pressing the issue for so long.
	The provision enables individuals to become involved in the establishment of companies, which then establish further companies, and they are no longer held responsible for their actions as individuals. In that way they avoid their duties and responsibilities. I urge my right hon. Friend the Minister to consider, though possibly not in the context of the Companies Bill, that we need to debate the matter further, so that companies do not become shadow bodies and no one is held responsible in any legislation, particularly in serious circumstances such as corporate manslaughter.

Margaret Hodge: I shall begin by responding to the issues raised by my hon. Friend the Member for Great Grimsby (Mr. Mitchell). I do not know where "Great" came from in the name of his constituency.

Austin Mitchell: It reflects the representation.

Margaret Hodge: I am sure other hon. Members are envious of my hon. Friend's title. "Great Barking" or "Great Burnley" would suit some of us very well.
	There seems to be some misunderstanding of what the amendments would do. Amendment No. 761 attempts to provide power to make regulations specifying the conditions with which a service address must comply. Our intention is to require a director of a company to have a service address in the same jurisdiction as the company's registered office. That is a practical way of ensuring that documents can easily be served by UK residents on any director. My hon. Friend the Member for Hayes and Harlington (John McDonnell) mistakes that. With the duties that will be placed on directors when the Bill is enacted, no one would be able to evade responsibility in the way he suggested.

Austin Mitchell: In that case, why is it not important that the service address be in the United Kingdom so that UK law can be enforced?

Margaret Hodge: The service address will be at the company's registered office. The Bill provides elsewhere for the registered office to be in the United Kingdom, so my hon. Friend's point is covered.

John McDonnell: Could someone—anyone—in the House explain clause 155(2) to me? It states:
	"This requirement is met if the office of director is held by a natural person as a corporation sole or otherwise by virtue of an office."
	If my right hon. Friend can assure me that that results in a requirement for a director to be a human being, that would be overwhelmingly reassuring.

Margaret Hodge: I can reassure my hon. Friend on that. Amendment No. 762 attempts to address the point. The hon. Member for Cambridge (David Howarth) dealt with it in his contribution. Subsection (2) does not mean that a company can have no directors who are natural persons. That is because of what is meant by "corporation sole." A corporation sole is a corporation that is constituted in a single person. Corporations sole are always holders of a particular office.
	One example is the Official Custodian for Charities. The holders of certain offices in the Church of England—for example, vicars—are corporations sole, although, interestingly, their equivalents in the Church in Wales and the Roman Catholic and non-conformist Churches are not. Other examples include our Secretary of State and the Public Trustee. Property, including cash and investments as well as land and buildings, that the member holds by virtue of his or her office passes on retirement, resignation or death to his or her successor. I hope my hon. Friends are content with that explanation.

Austin Mitchell: I love the sound of this sole music. It still does not answer explain why one of the directors—a corporate sole or whatever—does not have to be resident in this country.

Margaret Hodge: The answer is that if we tried to legislate on that—I look to the Box to confirm that I am correct—we would offend EU requirements on freedom of movement. We cannot restrict directorships to UK residents. I am getting nods from those in the Box, so I am correct. We would be restricting ourselves under the EU requirements.
	The Bill seeks to encourage the incorporation of companies in the UK because of the jobs and wealth that that brings. If we were to place on that the constraints that my hon. Friend the Member for Great Grimsby suggests, it would constrain our successful record of incorporations. Ensuring that directors have a service address in the UK allows anyone who so needs to communicate or pursue litigation.

Elfyn Llwyd: If a company were set up with a corporation sole as the single director, and if something went awry and criminal charges were brought against the company, would criminal charges lie against the corporation sole?

Margaret Hodge: I will write to the hon. Gentleman on that.

John McDonnell: May I have a letter as well? I was brought up a Catholic, so I do not completely understand, but I hope that my right hon. Friend is speaking ex cathedra. If an action is taken, for criminal activity or whatever, would it be against the office or the individual? If it is against the office, the individual has less incentive to abide by the law because he or she can away from it scot-free or resign from it. I do not want to get into debates about the bishopric of Ely this evening, but I would welcome correspondence on the matter.

Margaret Hodge: I will write because I do not want to mislead hon. Members, but my view would be that an individual who holds an office would be liable as that office holder. I see nods, so I might have got that right too.
	I come now to the amendments relating to the age of directors. I know that the Conservative party is desperate to grow its membership. It would be good if it desperately grew Back Benchers, who previously expressed such interest in the consideration of amendments to this Bill, but yet again only one has graced us with her presence.
	In Committee, the hon. Member for Huntingdon (Mr. Djanogly) seemed to think that it was generally a good idea to prohibit the appointment of young persons as directors, although I accept that he had concerns about transitional arrangements. He appears now to have slightly moved from that position. I still take the view—it is open to hon. Members to express their view—that it is wrong to have young people as directors. In the other place, their lordships wanted to change the minimum age to 18, not 16. The idea of bringing it down to 10 is extremely dangerous and could lead to huge exploitation by others who want to shelter behind a child director, relying on enforcement authorities' unwillingness to prosecute very young people. It is interesting that in the data to which the hon. Gentleman referred, there are 200 young directors under the age of 10.
	This is a sensible measure. We will consider the transitional arrangements, and there will be consultation. If we make exceptions, they would apply to a company rather than an individual, so the young entrepreneurs whom the hon. Gentleman identified during his summer reading probably would not be covered, if I was honest with him, because they are individuals. If they have an idea, there are other ways in which they can pursue their business interest. The companies to which this might be relevant would be charities or community interest companies, which have a particular concern for young people. In such circumstances it might be appropriate to create an exception, but it would be dangerous to do that for individuals.

Jonathan Djanogly: There is an important angle to this. If a young individual came to the Minister and said, "Look, I will have a serious tax problem or inheritance problem if I can't hold this directorship," would the Minister look at that on an individual basis under the provisions that exist in the legislation?

Margaret Hodge: I will look at that point. My understanding is that directorships are increasingly being given as christening presents, and one wonders about the purpose and intent behind that. Again, I am not 100 per cent. sure that that is sensible. We will look at the point that the hon. Gentleman raises.
	Government amendments Nos. 715 and 717 have generally been welcomed. We have undertaken them for the practical reasons to which the hon. Member for Cambridge (David Howarth) alluded. Amendment No. 770 improves the clarity of the clause. It makes it clear that the registrar of companies must be notified on the appointment of a director and if for any reason a person ceases to be a director.
	The Government have moved amendments tonight in response to the consideration of the Bill in Committee. That is one reason for our having so many amendments before us. I could have taken a much harder line in Committee and resisted what on most days I thought was a sensible debate, but I think that it is good for parliamentary scrutiny that we reach the best decisions for the long-term sustainability of this Bill. I am just sorry that the Conservative Opposition do not understand the way in which we have proceeded and chose again to make cheap political points and then not to appear when they could debate the issues.

Austin Mitchell: I had hoped that my right hon. Friend the Minister would make a plea to me on bended knee, but she forgot to do so. In some respects I am more confused than when I started. I doubt the point that she made on European law, but, if it is correct, it is yet another argument against the EU, so I am grateful for small mercies. In view of the problems that she has raised, I beg to seek leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Clause 162
	 — 
	Register of directors

Margaret Hodge: I beg to move amendment No. 255, in page 74, line 6 , leave out from 'company' to end of line 7 and insert—
	'(2A) The register must be kept available for inspection—
	(a) at the company's registered office, or
	(b) at a place specified in regulations under section (Regulations about where certain company records to be kept available for inspection).'.

Madam Deputy Speaker: With this it will be convenient to discuss the following amendments: Government amendments Nos. 256 to 260, 254, and 261 to 264.
	Government new clause 9— Inspection of records of resolutions and meetings.
	Government amendment No. 269.
	Government new clause 10— Instruments creating charges and register of charges to be available for inspection.
	Government new clause 11— Instruments creating charges and register of charges to be available for inspection.
	Government new clause 12— Regulations about where certain company records to be kept available for inspection.
	Government amendments Nos. 270 to 300.

Margaret Hodge: This package of Government amendments follows from the Commons Committee's consideration of where a company must make its register of directors available for inspection. The Committee agreed both that any increased flexibility as to where the company records are to be kept for inspection should apply to other registers and records and that there need to be safeguards against abuse. The new clauses and amendments meet those concerns. They provide a power for regulations to specify alternatives to a company's registered office as the place where a company must keep the specified registers and records available for further inspection.

Jonathan Djanogly: The Government have complained about the lack of hon. Members in the House. Apart from the fact that the Government Benches are hardly overflowing, what would happen if many more hon. Members were here? None of them would have the opportunity to speak, because of the programme motion. We will not even be able to address this group of amendments.
	 Amendment agreed to.
	 It being half-past Eight o'clock, Madam Deputy Speaker  proceeded to put the Questions necessary for the disposal of the business to be concluded at that hour, pursuant to Order [this day]

Clause 162
	 — 
	Register of directors

Amendments made: No. 256, in page 74, line 7, at end insert—
	'(2B) The company must give notice to the registrar—
	(a) of the place at which the register is kept available for inspection, and
	(b) of any change in that place,
	unless it has at all times been kept at the company's registered office.'.
	No. 257, in page 74, line 11, leave out 'or (2)' and insert
	', (2) or (2A) or if default is made for 14 days in complying with subsection (2B)'.
	No. 258, in page 74, line 12, leave out 'this section' and insert 'subsection (3)'.
	No. 715, in page 74, line 14, at end insert—
	'For this purpose a shadow director is treated as an officer of the company.' . — [Margaret Hodge.]

Clause 165
	 — 
	Register of directors' residential addresses

Amendment made: No. 716, in page 75, line 38, at end insert—
	'For this purpose a shadow director is treated as an officer of the company.' . — [Margaret Hodge.]

Clause 167
	 — 
	Duty to notify registrar of changes

Amendment made: No. 770, in page 76, line 15, leave out from 'from' to 'any' in line 17 and insert—
	'(a) a person becoming or ceasing to be a director, or
	(b) the occurrence of'. . — [Margaret Hodge.]

Clause 168
	 — 
	Application of provisions to shadow directors

Amendment made: No. 717, in page 76, line 41, leave out Clause 168. . — [Margaret Hodge.]

Clause 189
	 — 
	Directors' long-term service contracts: requirement of members' approval

Amendment made: No. 488, in page 86, line 33, leave out subsection (6) and insert—
	'(6) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'. — [Margaret Hodge.]

Clause 191
	 — 
	Substantial property transactions: requirement of members' approval

Amendment made: No. 591, in page 87, line 17, after 'company' insert
	'or be conditional on such approval being obtained'. — [Margaret Hodge.]

Clause 198
	 — 
	Loans or quasi-loans: requirments of members' approval

Amendment made: No. 592, in page 90, line 14, leave out Clause 198. — [Margaret Hodge.]

Clause 200
	 — 
	Credit transactions: requirement of members' approval

Amendments made: No. 593, in page 91, line 22, leave out 'A company' and insert—
	'(1) This section applies to a company if it is—
	(a) a public company, or
	(b) a company associated with a public company.
	(2) A company to which this section applies'.
	No. 490, in page 92, line 7, leave out subsection (5) and insert—
	'(5) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'. — [Margaret Hodge.]

Clause 202
	 — 
	Related arrangements: requirement of members' approval

Amendments made: No. 594, in page 92, line 35, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'.
	No. 491, in page 93, line 20, leave out subsection (5) and insert—
	'(5) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'.
	No. 595, in page 93, line 29, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'. — [Margaret Hodge.]

Clause 203
	 — 
	Exception for expenditure on company business

Amendment made: No. 596, in page 93, line 33, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'. — [Margaret Hodge.]

Clause 204
	 — 
	Exception on defending proceedings etc

Amendments made: No. 597, in page 94, line 2, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'.
	No. 598, in page 94, line 8, after 'company' insert 'or an associated company'.
	No. 613, in page 94, line 15, leave out 'in connection with the matter' and insert
	'under any transaction connected with the thing done'.
	No. 163, in page 94, line 33, at end insert—
	'section 674(3) or (4) (power of court to grant relief in case of acquisition of shares by innocent nominee), or'.
	No. 164, in page 94, line 35, leave out from 'conduct)' to end of line 37. — [Margaret Hodge.]

Clause 205
	 — 
	Exception for expenditure in connection with regulatory action or investigation

Amendments made: No. 599, in page 94, line 40, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'.
	No. 600, in page 95, line 2, after 'company' insert 'or an associated company'. — [Margaret Hodge.]

Clause 206
	 — 
	Exceptions for minor and business transactions

Amendment made: No. 601, in page 95, line 5, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval) or (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'. — [Margaret Hodge.]

Clause 207
	 — 
	Exceptions for intra-group transactions

Amendment made: No. 602, in page 95, line 28, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval) or (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'. — [Margaret Hodge.]

Clause 208
	 — 
	Exceptions for money-lending companies

Amendment made: No. 603, in page 95, line 39, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval) or (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'. — [Margaret Hodge.]

Clause 209
	 — 
	Other relevant transactions or arrangements

Amendment made: No. 604, in page 96, line 26, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'. — [Margaret Hodge.]

Clause 210
	 — 
	The value of transactions and arrangements

Amendment made: No. 605, in page 97, line 8, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval) and 199'. — [Margaret Hodge.]

Clause 211
	 — 
	The person for whom a transaction or arrangement is entered into

Amendment made: No. 606, in page 97, line 34, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval) and 199'. — [Margaret Hodge.]

Clause 212
	 — 
	Loans etc: civil consequences of contravention

Amendments made: No. 607, in page 98, line 3, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'.
	No. 608, in page 98, line 24, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval)'.
	No. 609, in page 98, line 34, leave out '198' and insert
	'(Loans or quasi-loans to persons connected with directors: requirement of members' approval)'. — [Margaret Hodge.]

Clause 213
	 — 
	Loans etc: effect of subsequent affirmation

Amendments made: No. 610, in page 99, line 3, leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval), (Loans or quasi-loans to persons connected with directors: requirement of members' approval)'.
	No. 611, in page 99, line 5, leave out paragraphs (a) and (b) and insert—
	'(a) in the case of a contravention of the requirement for a resolution of the members of the company, by a resolution of the members of the company, and
	(b) in the case of a contravention of the requirement for a resolution of the members of the company's holding company, by a resolution of the members of the holding company,'. — [Margaret Hodge.]

Clause 216
	 — 
	Payment by company: requirement of members' approval

Amendment made: No. 492, in page 100, line 39 leave out subsection (4) and insert—
	'(4) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'. — [Margaret Hodge.]

Clause 217
	 — 
	Payment in connection with transfer of undertaking etc: requirement of members' approval

Amendment made: No. 493, in page 101, line 23, leave out subsection (4) and insert—
	'(4) No approval is required under this section on the part of the members of a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'. — [Margaret Hodge.]

Clause 218
	 — 
	Payment in connection with share transfer: requirement of members' approval

Amendments made: No. 165, in page 102, line 14, leave out '430E of the Companies Act 1985 (c. 6)' and insert '955'.
	No. 494, in page 102, line 26, leave out subsection (6) and insert—
	'(6) No approval is required under this section on the part of shareholders in a body corporate that—
	(a) is not a UK-registered company, or
	(b) is a wholly-owned subsidiary of another body corporate.'.
	No. 644, in page 104, line 26, leave out Clause 223. — [Margaret Hodge.]

Clause 226
	 — 
	Requirement of consent of charity commission: companies that are c harities

Amendments made: No. 166, in page 105, line 11, leave out 'Company Law Reform' and insert 'Companies'.
	No. 612, in page 105, line 22,leave out '198' and insert
	'(Loans to directors: requirement of members' approval), (Quasi-loans to directors: requirement of members' approval) or (Loans or quasi-loans to persons connected with directors: requirement of members' approval)
	No. 167, in page 105, line 34, leave out 'Company Law Reform' and insert 'Companies'. — [Margaret Hodge.]

Clause 228
	 — 
	Copy of contract or memorandum of terms to be available for inspection

Amendment made: No. 259, in page 106, line 23 [Clause 228], leave out from end to end of line 27 and insert ', or
	(b) a place specified in regulations under section (Regulations about where certain company records to be kept available for inspection).'. — [Margaret Hodge.]

Clause 234
	 — 
	Qualifying third party indemnity provision

Amendments made: No. 168, in page 109, line 28, at end insert—
	'section 674(3) or (4) (power of court to grant relief in case of acquisition of shares by innocent nominee), or'.
	No. 169, in page 109, line 30, leave out from 'conduct)' to end of line 32. — [Margaret Hodge.]

Clause 237
	 — 
	Copy of qualifying indemnity provision to be available for inspection

Amendment made: No. 260, in page 111, line 11, leave out from end to end of line 15 and insert ', or
	(b) a place specified in regulations under section (Regulations about where certain company records to be kept available for inspection).'. — [Margaret Hodge.]

Clause 239
	 — 
	Ratification of acts of directors

Amendment made: No. 645, in page 112, leave out lines 17 to 19 and insert
	'must be made by resolution of the members of the company'. — [Margaret Hodge.]

Clause 243
	 — 
	Permitted use or disclosure by the registrar

Amendment made: No. 677, in page 114, line 11, at end insert—
	'(3A) The Secretary of State may make provision by regulations requiring the registrar, on application, to refrain from disclosing protected information relating to a director to a credit reference agency.
	(3B) Regulations under subsection (3A) may make provision as to—
	(a) who may make an application,
	(b) the grounds on which an application may be made,
	(c) the information to be included in and documents to accompany an application, and
	(d) how an application is to be determined.
	(3C) Provision under subsection (3B)(d) may in particular—
	(a) confer a discretion on the registrar;
	(b) provide for a question to be referred to a person other than the registrar for the purposes of determining the application.'. — [Margaret Hodge.]

Clause 247
	 — 
	Power to make provision for employees on cessation or transfer of business

Amendment made: No. 646, in page 116, line 27, leave out subsection (5). — [Margaret Hodge.]

Clause 256
	 — 
	Associated bodies corporate

Amendment made: No. 614, in page 120, line 17, leave out from 'Part' to end of line 19 and insert '—
	(a) bodies corporate are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate, and
	(b) companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate.' .—[Margaret Hodge.]

Clause 260
	 — 
	Derivative claims

Amendment made: No. 170, in page 121, line 17, leave out '459 of the Companies Act 1985 (c. 6)' and insert '961'.— [Margaret Hodge.]

Jonathan Djanogly: I beg to move amendment No. 412, in page 121, line 21, leave out 'or proposed'.

Madam Deputy Speaker: With this it will be convenient to discuss the following amendments:
	No. 413, in page 121, line 24, leave out 'or another person (or both)'.
	No. 414, line 25, leave out subsection (4).
	No. 415, line 33, at end insert—
	'(6) A derivative claim under this Chapter may only be brought if the directors have been requested by a member of the company to bring a claim in respect of an act or omission specified in subsection (3) and have not agreed to the request after the expiry of a reasonable period from service of the request.'.
	No. 416, in page 123, line 8, clause 263, at end insert ', or
	'(d) that the directors have decided not to pursue the claim, unless the court considers that there is a substantial risk that in reaching their decision they acted in breach of their duties to the company, or
	(e) that the claim is one which the company in general meeting could validly decide not to pursue, unless the court considers that there is a substantial risk that a decision not to pursue the claim would only be taken as a result of votes cast by members with a personal interest, direct or indirect, in the decision, or
	(f) that pursuing the claim would not be in the interests of the company.'.
	No. 417, line 8, at end insert ', or
	'(d) that the directors have decided not to pursue the claim, unless the court considers that there is a substantial risk that that transaction constitutes a fraud on the minority of members of the company, or
	'(e) that the claim is one which the company in general meeting could validly decide not to pursue, unless the court considers that there is a substantial risk that a decision not to pursue the claim would only be taken due to the majority of the shares being in control of those with a direct or indirect interest in the transaction.'.

Jonathan Djanogly: For the first time today, we have a decent amount of time for Opposition amendments—I suppose that I should be grateful.
	Despite amendments in the other place, which have improved clause 260, part 11 dealing with derivative claims is a complex area that still gives many much concern. Currently, a shareholder can bring a claim on behalf of a company against directors only in limited circumstances. Part 11 sets out a new procedure of derivative actions that enable shareholders to bring a claim on behalf of the company for directors' breach of duty, if that breach has not been authorised or ratified by the company. Together with part 10, we believe that this has significant potential to increase liability for directors.
	Before I go any further, I should like to explain the current common law position and set out what the Government aim to do in this area. Derivative claims are proceedings brought by a shareholder. Under the new Bill, they must be either
	"in respect of a cause of action vested in the company and seeking relief on behalf of the company"
	and
	"brought only in respect of causes of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company."
	This is significantly wider than the current common- law position.
	There are two major concerns in relation to part 11. First, that it does not advance the common law and, secondly, that its effect, particularly when it is combined with part 10, will be detrimental to directors. We have tabled amendments that seek to deal with those concerns, which I shall discuss in due course. The leading common-law case on which this codification attempts to build is that of Foss  v. Harbottle. If the Bill's intention is to enshrine in statute the well-established exceptions to the rule set out in the case of Foss  v. Harbottle, our view and that of the lawyers who have advised us is that that is not immediately achieved by the current drafting. The rule in Foss  v. Harbottle is that a member cannot bring an action on behalf of the company for an injury done to the company; the company is the injured party and the action vests in it.
	The exceptions to the rule in Foss  v. Harbottle include circumstances in which the transaction constitutes a fraud on the minority. That includes fraud proper as well as breach of fiduciary duty as a director and circumstances in which the wrongdoers are in control of the shares of the company. The non-inclusion of this fraud control test in the Bill represents a radical departure from the previous thresholds to a member making a derivative claim. The result of this non-inclusion is that it will be easier for shareholders to bring claims against directors.
	Although the court will now be required to consider the evidence and merits at the earlier stage, there is a danger that this part of the Bill will simply create a more complex procedure without any corresponding reduction in the potential administrative burdens for companies. It therefore makes sense that part 11 should be amended to preserve the traditional thresholds of fraud on the minority and wrongdoer control, as that would make it clear in statute that this new regime is not intended to sweep away the existing case law.
	As the new legislation does not replicate existing case law, it will take some time for a body of case law to develop. We feel that this will create uncertainty for some period as to the extent of the derivative claim provisions and the burden of this will largely fall on the company. This could, in part, be remedied by the legislation mirroring more closely existing law. In practice, derivative claims have to date been relatively rare, but any potential benefit this codification will have, which will be minimal, will be far outweighed by the possible damage that will be wrought by increased shareholder litigation and reducing the number of people who are willing to take up company directorships in the UK.
	A further key change in this Bill is that the persons engaging in fraudulent conduct need not have received a benefit. Members will therefore be allowed to make claims for an honest act or omission of a director where that results in a breach of duty, regardless of whether the individual has received a benefit. Under the existing common law, it is not possible to make a derivative claim as a result of negligent action unless the person in breach of duty has received a corresponding benefit. This represents a shift from the existing position and the focus is much more on allowing member control of directors' actions.
	The range of circumstances under which a derivative action may be brought will be much wider than is currently the case. This is once again an area of the law where the Government have said that the intention of putting in new clauses has been to codify the existing common law position, but this is, unfortunately, once again an area where the Government are overturning the common law position. The codification of the basis of bringing a claim and the means of bringing that claim will serve only to make it easier for claims to be brought against company directors.
	Company directors also fear that increased litigation may lead to increased insurance premium costs—that is a very real fear for company directors. Should the rates that directors and officers have to pay go up, there will be a further disincentive to people becoming company directors. I am afraid that that is becoming a theme of parts 10 and 11, and it is not a happy one.
	The concern that part 11 will increase potential liabilities for directors and the chance of tactical and vexatious litigation by activist shareholders has been raised by many others. The City law firm, Lovells, says:
	"The Explanatory Notes to the Bill explain that 'the'"
	derivative action
	"'clauses do not formulate a substantive rule to replace the rule in Foss v Harbottle, but rather a new procedure for bringing such an action which set down criteria for the Court distilled from the Foss v Harbottle jurisprudence'. It is hard to see how this can be correct. As the Explanatory Notes themselves make clear, the rule in Foss v Harbottle is that is for the company to bring proceedings where a 'wrong has been done to the company', and that an exception can be made where there is conduct amounting to a fraud on the minority. The case of Estmanco (Kilner House) Ltd v Greater London Council made clear that 'fraud' in this context extends beyond fraud at common law to include 'the equitable concept of fraud on a power', including an abuse or misuse of power. It is generally considered that fraud, in this sense, does not include negligence. Other grounds include where the director's act is illegal, ultra vires and not ratifiable, or where the shareholder has acquired a personal right against a relevant director.
	Whilst the Explanatory Notes say that Part 11 does not seek to overturn these previous 'well established principles', it is hard to see how this can be. If Part 11 comes into law, individual shareholders will be able to bring proceedings against directors, including in respect of negligence, which cannot be summarily struck out for want of locus standii, but only under a brand new test, which is unconnected to these common law factors. As a result, there is a clear risk that multiple stakeholders might make good use of Part 11 to further their own various platforms, at the expense of companies' time and money, and their directors time and money, personal stress, and claims upon their D&O insurance. It may even be possible for such a shareholder to use the provisions of this Part to apply for an order that the company pay his costs of bringing the proceedings, along the lines of the application upheld in Wallersteiner...If so, this could produce the very odd result that a number of activists could each buy a single share in the company, and each bring separate proceedings against directors, in respect of conduct predating their shareholding, at the company's expense. Such claims may well, however, be struck out by the Court under the first stage of section 242 referred to above."
	We hope that that would be the case, but clearly the risks are there.
	Let me turn to our amendments, which seek to rectify the problems that I have highlighted. Clause 260(3) states:
	"A derivative claim...may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company."
	That wording is not sufficiently precise and is too wide. In particular, the use of the words, "or proposed", go too far. A member should not have the statutory right to make a derivative claim to restrain some proposed act or omission. The intention should be to provide a remedy for a member where there has been an actual act or omission. To include the words, "or proposed", may be a charter for members at any time to take action to restrain what they thought was a potential future breach of the relevant duties. We therefore propose to amend the wording of the clause as set out in amendment No. 412. In Committee, the Solicitor-General said that this approach is too restrictive, but we are yet to be convinced by his arguments.
	Amendments Nos. 413 and 414 were brought to us by the Institute of Chartered Accountants, which sets out its position in its brief of 10 October:
	"We are concerned that the draft clauses do not reflect the Government's intention, as stated in its explanatory material and agreed to in the House of Lords Committee stage debate, of codifying existing common law principles on derivative actions. These clauses create new rights for members to bring a derivative action against persons other than directors. An actual or alleged breach of duty by a director"—

Mike O'Brien: I am interested that the briefing from the outside body suggests that we are codifying. The aim is to deal with some of the exceptions in part 11, not to replace the whole rule in Foss  v. Harbottle. The case remains as part of common law.

Jonathan Djanogly: Yes, but as I explained to the Solicitor-General, although the Government are maintaining that the case remains, the clause as drafted will significantly alter the application of the case.
	Action against a director for breach of duty could, therefore, be effectively used as a springboard for a member to bring a derivative action against others. The Institute of Chartered Accountants believes that it will encourage nuisance claims against directors. We therefore tabled amendment No. 413. In Committee, the Solicitor-General stated that clause 260 was drafted on Law Society recommendations. He gave examples of third parties who hold money, transferred in breach of trust from the company, and who should be permitted to be pursued by a member of the company. Although that may be true in limited circumstances, we remain concerned about the growing scope of the clause and support the position of the Institute of Chartered Accountants.
	The City law firm Allen and Overy brought the substance of amendment No. 415 to us. It aims to ensure that the company retains an opportunity to exercise its primary right to sue the directors. Although it is easy to get carried away with arguments for and against members being able to seek relief on the company's behalf, we should not forget that the primary right is for the company to initiate the action. The amendment would embed that right in primary legislation.
	Amendment No. 416 is aimed at resolving some of the problems that I have highlighted. The Law Society has been a great help in drafting the amendment, which was first tabled by Lord Hodgson in the other place. It would insert in clause 263 three new provisions, which oblige the court to refuse permission to continue a claim.
	The first provision would apply when the directors had decided not to pursue the claim. The second would apply when the shareholders had decided not to pursue the claim. The third would apply when the court concluded that pursuing a claim was not in the company's best interests.
	The first provision would apply when a company's directors had decided not to pursue the claim, unless the court considered them to be in breach of their duties in making the decision. The purpose is to ensure that the court does not second-guess the directors' commercial judgment unless it considers that, by deciding not to proceed, they are in breach of their duties. In Committee, the Solicitor-General maintained that that should be a relevant factor for the court in reaching its decision but not a bar. He said that the amendment would prevent meritorious claims from being granted permission for leave. However, we urge the Government to trust directors and accept the amendment.
	The second provision, for when shareholders had decided not to proceed, would apply when the court believed that the majority of shareholders, excluding those with a personal interest in the decision, did not wish to proceed with a claim.
	I hope that the third provision is self-explanatory and constitutes common sense.
	Although the Government gave explanations about the amendment in Committee, we do not believe that they have merit. The amendment would improve the drafting considerably. We emphasise that its purpose is to introduce a threshold test that does not involve expense.
	The Government have added new reasons for the court to reject a derivative claim. Are the tests strong enough? We contend that they will not be in practice. There is a concern that it will be possible for firm advice to be given on the court's approach to the exercise of its unfettered discretion only after years of jurisprudence. Uncertainties will be damaging to business.
	Amendment No. 417 would reintroduce the fraud on the minority and wrongdoer control tests that existing common law contains. I have already spoken about the way in which the radical departure from common law has worried several stakeholders to whom we have spoken. From the way that the hon. Member for Cambridge (David Howarth) is shifting in his seat, I have a feeling that he, too, will cover the matter.
	I thank the Solicitor-General for his letter of 25 July on derivative claims, which set out the legal position about fraud on the minority following implementation. Although we acknowledge that the Government are attempting to clarify a difficult matter, we believe that the common law position should prevail and have tabled amendment No. 417 on that basis.
	The issue is important to us. We have been lobbied significantly by companies, accountants, solicitors, the CBI and many interest groups, including many City solicitors. The Government need to reconsider the matter, because if we get it wrong, we open up the possibility of a culture of litigation, which exists in the United States, but that we do not want to experience in this country.

David Howarth: I am surprised that so many Members are present now that we have got on to Foss  v. Harbottle, the heart of lawyer's company law. To re-emphasise the point made by the hon. Member for Huntingdon (Mr. Djanogly), the whole point of the rule in Foss  v. Harbottle is to save time. It is to prevent shareholders—particularly minority shareholders—trying to sue in the company's name to enforce the company's rights against somebody else in circumstances where the company could easily get rid of the wrong itself, does not want to sue or can validly prevent the action from going forward.
	As I understand it, the Government have said that they are trying to clarify the law without codifying it. As the hon. Member for Huntingdon has said, the trouble with that is that it will tend to cause some confusion in areas where the statute does not mention the previous law. Would the courts reconstitute the previous law? It might be argued that it will be several years before we end up back where we started.
	As the hon. Member for Huntingdon said, the law on this matter is not entirely clear. I have a problem with his amendment No. 417, simply on the ground that the concept of fraud on the minority is so difficult and so contested in the courts and academic journals that it is not really worth putting into a statute. Most academic writers think that it is too confusing to use, and many point out that what it really means is fraud against the company. Perhaps we should not put into statute a phrase of such contested meaning.
	Other amendments that have been tabled have varied merit. The idea of amendment No. 412, which would leave out the word "proposed", is, as the hon. Member for Huntingdon said, to prevent derivative actions in advance of the harm being done. That seems to me a useful aspect of the current draft, as it is frequently cheaper for all concerned to prevent harm from being done than to try to cure it later. Obviously, the word "proposed" does invite possible extra legal actions. The question, however, is whether the safeguards in the rest of the clauses with which we are dealing prevent abuse. To a large extent, I think that they do. I would not therefore support amendment No. 412.
	Amendment No. 413 would take away the ability of a derivative action to cover rights that the company has against third parties. In the past, that has always been thought to be possible, and the amendment would impose a restriction on such action. This area of law is always about the company's rights, not the personal rights of the individual shareholders or directors. The question is whether derivative action should be used to allow shareholders to enforce the company's rights, and it seems to me perfectly sensible to propose that it should, given the other restrictions on the possible use of such action.
	Amendment No. 415, however, seems to be a more sensible proposal. As has been said, the whole point of Foss  v. Harbottle is to prevent shareholders in a minority action from wasting everyone's time by bringing a derivative action that is unnecessary or has no chance of succeeding. The amendment allows the company—in particular, the board of directors, the organ of the company that normally has such a right—to decide first whether it wants to proceed with the action. It seems to me to be straightforwardly correct, and in the spirit of the existing law that goes back to the original 19th-century cases, to allow the company in the form of the board of directors to have a pre-emptive right of first refusal on whether an action should be brought.
	Amendment No. 416 would reconstitute the details of the rule itself. Its ambition is admirable, and proposed subsections (d) and (e) are clearly linked to legal developments in the 19th century—the former to the Atwool case of 1867, and the latter to the Menier  v. Hooper's Telegraph case of 1874. The intention behind the amendment is good, but it is difficult to encapsulate very complex cases in statute. In a way, the amendment is vulnerable to the objection expressed by the hon. Member for Huntingdon against the whole thrust of the Bill—that it tries to put into statutory form a very complex area of case law. One could argue that he has not got it quite right.

Jonathan Djanogly: The hon. Gentleman is right that I do not want to create new case law, and that the amendment's attempt to incorporate in the Bill the existing common-law position runs the risk of falling into that trap. However, he will appreciate that the amendment is an attempt to ensure that that the existing provisions should not be widened.

David Howarth: I appreciate the attempt, but the question is whether it is entirely successful.
	Amendment No. 416 paragraph (f) is a new departure, in that it would insert in the Bill the sort of catch-all provision to which one would normally object on the grounds that it is vague and unclear. The amendment has its merits, therefore, but needs more work.
	I have already dealt with amendment No. 417, which I said was not a good idea because it would bring back the notion of fraud on the minority.
	Finally, the Bill is an important attempt at reform, as the hon. Member for Huntingdon has noted. He seems to think that that reform is not desirable, but many people would differ with him about that. The particular question that I am dealing with here is whether it is necessary to prove that the directors made a gain from their wrongdoing before a derivative suit can be brought. The present law states that such an action cannot be brought against directors who have committed negligence, except where that negligence has resulted in a gain for the wrongdoer.
	It is not entirely clear why that rule is in place. I agree with the many people who think that it is simply an historical accident, the result of taking too seriously the notion of "fiduciary"—that a gain has to be identified before legal action can be taken. Another possibility is that the relevant case law was not consistent, so that judges went one way, regretted it, and then decided to go the other way.
	The underlying question is whether a derivative suit should be possible when directors have lost the company money through their negligence. That would give rise to a claim that belongs to the company, and the next question is whether the proposed reform in the Bill would give directors an incentive to do their job better. I think that it would and therefore am in favour of it.
	I recognise that there could be a problem if people on the outside think that what is being done is a codification rather than a reform. That would not be correct: the Bill proposes not a codification but a reformed system that has some merits.

Mike O'Brien: I thank the hon. Members for Huntingdon (Mr. Djanogly) and for Cambridge (David Howarth) for their comments on this part of the Bill. I particularly thank the hon. Member for Cambridge, whose erudite and helpful contribution has helped to clarify many of the issues. I should like to make a couple of points for the sake of clarification before I set out a brief outline of the Government's position.
	The hon. Member for Cambridge is quite right to say that our aim is not to codify the whole of Foss  v. Harbottle. That case states that only a company can sue for a breach of duty, and the courts have allowed shareholders certain exceptions to sue by various derivative claims. We are replacing the exceptions—rather than codifying—by means of part 11 of the Bill. As I have said, Foss  v. Harbottle will survive.
	The hon. Member for Huntingdon is right to say that we need to ensure that we do not create a culture of litigation in this country. We believe that our provisions will strike a balance that will avoid the development of that kind of culture. Our aim is similar to his in that regard, but we disagree over the way in which the provisions will apply.
	Both hon. Members made the point that, in order to develop this area of law further, there would need to be more case law. They are quite right, and the new statute will bring new case law with it. The common law has developed through case law in any event. Even if we did not introduce these reforms or bring into operation the clauses in part 11, there would still be some case law. There will therefore be a degree of further development of the law, and the statute will help that development. That is our intention.
	I also agree with the hon. Member for Huntingdon that this is an important part of the Bill. Let me therefore outline the Government's approach in this area. Our starting point has been the need to balance the ability of directors to manage the affairs of companies in good faith and the right of the members to bring an action on behalf of a company in circumstances in which a director has acted in breach of his duty to the company and in which an action would not otherwise be brought. I believe that part 11 achieves that balance very well.
	A derivative claim is not a shareholder action in the sense of an American class action. It is an action brought by a shareholder on behalf of a company. It follows from this that any damages arising from a successful claim would be paid to the company, not to the shareholders who have brought the action. Since shareholders who bring an action may also face heavy costs, a derivative claim is very much an action of last resort. It is not something that any shareholder is likely to embark on lightly, as they could put themselves in a very difficult position if they did so.

Jonathan Djanogly: Our fear in relation to this provision concerns costs. If an action group persuaded 300 of its members to buy one share each in a company, then funded the action of those shareholders, that could give rise to problems. People might bring court cases without caring about the costs, because they were being funded by a third party.

Mike O'Brien: It is always possible that there will be exceptional circumstances. In effect, however, those people would be seeking to mount a claim, any costs from which would go back to the company. The beneficiary would therefore be the company.

Jonathan Djanogly: My point is that the Minister is speaking about individuals winning or losing—as in America—or about the company winning or losing. However, individuals who own only one share making a claim might not have any desire to win individually. They might be taking the company to court to make a point, and if they are funded by a third party, they will be able to do that much more easily under these provisions than under the present legislation.

Mike O'Brien: I do not necessarily accept that it would be that easy. The hon. Gentleman should look at the details of the derivative claims provisions. I think that they provide sufficient safeguards against the development of a litigation culture, as our aim is to prevent a pressure-group level of litigation against particular companies. When I have developed my argument, perhaps he will see how we intend to do that.
	A breach of a director's general duties to the company is a serious matter. Indeed, it may be extremely serious for the company, whose very existence may be put in jeopardy by the breach or threatened breach of duty. The general duties set out in chapter 2 of part 10 do not constitute guidance or a wish list. They are statutory duties, and every director must comply with them. It is therefore important that there be a clear and accessible mechanism by which shareholders can, if necessary, bring an action in the name of the company against a director for breach of one of those duties. For shareholders, there are two main problems in current law. First, as the hon. Member for Cambridge knows, the law is to be found in case law that stretches back more than 150 years and is anything but clear and transparent. That is why the Law Commission recommended that the right to bring a derivative action at common law should be replaced by a
	"new derivative procedure with more modern, flexible and accessible criteria for determining whether a shareholder should be able to pursue the action".
	It is essential that the procedural requirements for bringing a derivative action are accessible and clearly set out, so that they can be understood by both directors and shareholders.
	Secondly, the law is built on somewhat arcane legal principles relating to the concept of fraud on the minority. Those principles are difficult and obscure, even to lawyers, but they restrict the ability of shareholders to bring meritorious claims. That is why the new statutory procedure differs from the common law in two key respects. We do not want the claimant to have to show "wrongdoer control"—that is, to show that the company is controlled by the directors whom the claimant believes to have acted in breach of their duties—as that might make it impossible for a derivative claim to be brought successfully by a member of a widely held company, including almost all major quoted companies.
	We also want it to be possible to bring a claim in cases of negligence, even if it cannot be shown that the directors have profited from the negligence. As the hon. Member for Huntingdon says, it is important that the Bill should not permit shareholders to bring a derivative claim that is motivated by reasons other than the commercial success of the company. We have made it clear from the beginning that we want such claims to be dismissed by the courts at the earliest possible opportunity, without the companies being involved. However, the general reforms to civil procedure introduced by Lord Woolf may mean that unmeritorious cases proceed further before being thrown out. Under those reforms, there is no requirement to obtain leave before a claim is issued. Instead, the claimant must apply to the court for "permission to continue" the claim. For that reason, in the other place, we tabled a package of reforms that ensure that the courts can dismiss unmeritorious claims at an early stage.
	The amendments in the other place introduced a two-stage procedure for permission to continue a derivative claim. At the first stage, the applicant would be required to make a prima facie case. The court would be required to consider the issue on the basis of the evidence filed by the claimant alone, without requiring any evidence from the defendant. The courts must dismiss applications at that stage if what is filed does not show that there is a good case. At the second stage, but before the substantive action begins, the court considers whether the decision of the directors was one that the company could reasonably and independently have taken. In addition, the Government amendments that were tabled to part 11 in another place made it clear that the court may
	"make any consequential order it considers appropriate."
	Examples include a cost order or a restraint order against the applicant. That would give the court explicit power to adjourn the permission application, either for a specific event, such as a general meeting of the company and other soundings, or more generally, so that it can revisit the question of permission at a later stage.
	Thirdly, it provides that, in deciding whether to permit a claim to continue, the court should have particular regard to any evidence as to the views of members of the company who have no personal interest, direct or indirect, in that particular matter. That will help to address concerns that it is not practical or desirable for major quoted companies to ask shareholders formally to approve directors' commercial decisions.
	I believe that these clauses, as amended in another place, strike the right balance between the ability of directors to take business decisions in good faith and shareholder rights, and they make this important area of law clearer and more accessible. I emphasise that they do not oblige the courts to involve themselves in business judgments or to reverse the burden of proof in any way.

Jonathan Djanogly: The Minister says that the procedure will be clearer and more accessible. One of our concerns is that the fact that the procedure is clearer and more accessible will mean that more people will want to use it and therefore there will be more litigation.

Mike O'Brien: It will be clearer and more accessible in the sense that the constraints on someone using it in a way that we would not regard as justified—I am not sure that there is much difference in our view on that—are quite strong. Yes, the procedures that I have set out and the amendments that were tabled in another place make the procedure more accessible. If the hon. Gentleman's argument is—I trust that it is not—that we ought to make the law inaccessible to ordinary shareholders in case they exercise their rights, it is a bad argument. Our aim should be to try to create clear law so that the directors know where they are, the shareholders know what action they can take and the general public can understand it.
	We are seeking to set out our view that the shareholders should, in restricted circumstances, be able to take a derivative action, but that the courts should have the ability to intervene to prevent frivolous actions or actions that are not aimed at ensuring the commercial success of the company. In other words, they are aimed at a pressure group pursuing a viewpoint that is not about the commercial success of the company.
	I think that we have struck a proper balance. The amendments that we have tabled and have had accepted in another place are able to deal with the main concerns that the hon. Member for Huntingdon raised. As I say, I do not think that there is any great difference of view of what we want. The hon. Gentleman fears that things will happen which we say we have provided protections against. Our view is that those protections will ensure that we are able to achieve the benefits of more accessible and clearer legislation without the problems caused by unnecessary litigation.
	I shall now look at the amendments to clause 260, beginning with amendment No. 412, which attempts to delete "or proposed". Amendment No. 412 is based on a misunderstanding of the current law and the position under the statutory statement of directors' general duties. Clause 179 provides that the consequences of breach or threatened breach of the statutory duties are the same as would apply if the corresponding common law or equitable principle applied. The reference to threatened breaches is important. Under the present law, companies may be able to take pre-emptive action to stop a breach of duty from taking place before it actually happens and the damage is done. There could, for example, be a threatened breach of duty if a director was refused permission to exploit a corporate opportunity but then announced that he was going to go ahead and do it anyway. The remedies in such cases, which include an injunction or a declaration, provide an important safeguard of a company's interest against wrongdoing by a director. A derivative action is an action brought by the company, and there is no sensible basis on which the remedies available to the court should be limited in the way proposed in the case of a derivative claim.
	Amendment No. 413 would remove the right to bring a claim against a third party. That provision in clause 263 flows from a clear Law Commission recommendation, which is explained in detail in part 6 of the Law Commission's report on shareholder remedies. The principles are important. The claim should be allowed only if there has been a breach of a duty by a director, but the relief sought may be against a third party as well as against the director personally.
	9.15 pm
	It might be helpful if I set out a couple of examples that have been cited by the Law Commission in its report on shareholder remedies. In the first example, a relief is sought from a third party for knowingly being in receipt of money or property or for property transferred in breach of trust or for knowing assistance in a breach of trust. It seems to us correct that the member should be entitled to pursue a remedy against the third party in circumstances where he is holding assets belonging to the company, which he has obtained in those particular circumstances.
	In the second example, a profitable company is a victim of a tort by a third party—perhaps another company. The directors, while otherwise committed to the well-being of the company, have ulterior motives of their own for not wishing to enforce a remedy for the tort. Although the directors would in those circumstances be in breach of duty, that breach would not have given rise to the claim, so it would not be open to a member to bring derivative proceedings against a third party. Again, we believe that that is an appropriate outcome.
	I hope that those examples show that it is possible to uphold important principles while placing reasonable constraints on the application of the provision and that this would not result in members seeking to bring derivative claims against third parties simply where they disagree with a decision of the board not to sue a third party. I believe that clause 263 achieves that.
	I now wish to deal with the provisions in clause 264, which respond to the requests from some respondents to the company law reform White Paper, including the Law Society, that part 11 should state clearly that it is immaterial whether the cause of action arose before or after the person seeking to bring or continue a derivative claim became a member of the company. That reflects the position in the common-law derivative action, and the provision also makes it clear that current members, even if not members at the time that the corporate cause of action arose, are the only plaintiffs entitled to bring proceedings. In doing so, it accurately reflects the nature of the derivative action that is the company's cause of action. As such, the point in time at which the member became a member is immaterial. I cannot therefore support the amendment proposed by the hon. Member for Huntingdon.
	Amendment No. 415 provides that a derivative claim may be brought only if the directors have refused a request by a member to bring a claim. The amendment goes to the heart of what we are seeking to achieve in our reform of the law in this area. At present, a derivative claim will not be available to the minority shareholder unless he can show that, to put it briefly, the wrongdoers are in control. The onus is thus on the claimant minority shareholder who seeks to bring a derivative claim to allege in his statement of case, and then to demonstrate, that those whose actions he complains of are in control of the company and will not permit its name to be used as claimant in the action.
	If the minority shareholder cannot demonstrate control, the action will be dismissed. However, the minority shareholder does not need to be able to demonstrate that the company has rejected a formal application to instigate proceedings, nor show that he has procured the summoning of a general meeting to consider the question, which has then rejected his request.
	As the Law Commission observed, the meaning of "wrongdoer control" is not clear, and as long ago as 1962, believe it or not—it sometimes takes us a long time to achieve things in this place—the Jenkins committee said that it would be
	"extremely difficult to devise a satisfactory general provision"
	expressing this concept and the remainder of the exception to the rule in Foss  v. Harbottle in wider terms. That is why the Law Commission has proposed a new statutory remedy.
	Under the proposed statutory procedure, a member need not demonstrate wrongdoer control, but one of the factors that the court must take into account in considering whether to give permission to continue the claim is whether the company has decided not to pursue the claim. It may therefore be advisable for a member seeking to bring an action to ascertain the company's intentions with regard to pursuing its cause of action before bringing a derivative claim, but we do not believe that that need be a mandatory precondition.
	The hon. Member for Huntingdon proposes that we enshrine in law such a mandatory condition. He takes the view that permission should be sought, at least. I have some sympathy with the proposal, but we do not believe that such a mandatory precondition would be helpful or necessary to bring a claim. We fear that going down that route would bring us right back to a number of the unsatisfactory and undefinable concepts that I have just mentioned. Although I have every sympathy with the aim in amendment No. 415, I cannot accept its mandatory nature, so I hope that it will not be pressed to a vote.

James Gray: I am grateful to the Minister for giving way, but I know that he wants to read the note that his colleagues have passed to him. Does he agree that the net upshot of the clause is that more people can be sued under it than previously?

Mike O'Brien: If the hon. Gentleman had been here earlier in the debate, he would realise that I do not agree with that point at all. If the director has behaved inappropriately, we want the shareholder to be able to take a course of derivative action that will enable them to enforce the company's rights. The shareholder is seeking to enforce the company's rights—that is the key thing, and it is where I began. We need to ensure that we have the proper balance in place, and I fear that the provisions that the Opposition seek to insert in the clause would create a lack of balance, so the shareholder could not take action when they needed to do so if there were impropriety by a director. This is about balance and the need for care. We have got the balance right, and although the Opposition are taking points from outside organisations, they might not have got that balance right.
	Clause 263 sets out the criteria that must be taken into account by the court in considering whether to give permission to continue a derivative claim. Subsection (2) provides that the court must—I emphasise the word "must"—refuse leave to continue a derivative claim if it is satisfied that a person acting in accordance with the duty to promote the success of the company would not seek to continue the claim; or where the cause of action arises from an act or omission that has not yet occurred, that act or omission has been authorised by the company; or where the cause of action arises from an act or omission that has already occurred, that act or omission has been either authorised or ratified by the company.
	Amendments Nos. 416 and 417 seek to add to the list of factors matters that, if established to the satisfaction of the court, would constitute a bar to the continuation of a derivative claim. The Bill's approach follows the Law Commission's recommendation that whereas ratification of a breach should constitute a bar to the bringing of a derivative action, the fact that a breach of duty is ratifiable should not constitute a bar, but should feature as one of a list of factors to which the court should have regard in considering whether to grant permission to continue the claim.
	Amendment No. 416 would add three further grounds that, if established to the court's satisfaction, would constitute a bar to the continuation of a derivative claim. Therefore, let me consider each briefly. The first new bar to the bringing of a derivative claim would be a decision by the directors not to pursue the claim, unless the court considered that there was a substantial risk that, in reaching their decision, they had acted in breach of their duties to the company. That factor already appears on the list of matters that have been taken into account.
	The second new factor under the amendment would be a claim that the company in general meeting could validly decide not to pursue, unless the court considered that there was a substantial risk that a decision not to pursue the claim would be taken only as a result of votes cast by members with a personal interest, direct or indirect. It is not clear from the drafting whether the amendment refers to a claim relating to a breach of duty that the company might ratify in general meeting, or to something short of that. In either case, we do not consider that this is a matter that should bar a derivative claim. The clause already provides that where a breach of duty has been ratified, that will constitute a bar and the claim will go no further.
	The third factor that the amendment would insert into clause 263 is that pursuing the claim would not be in the interests of the company. That overlaps in an unhelpful way with the existing factor in subsection (2)(a), namely,
	"that a person acting in accordance with section 173...would not seek to continue the claim".
	It is important that clause 173 and part 11 use consistent wording.
	Amendment No. 417 would add two further grounds that are variants of those proposed by amendment No. 416, and once again we are not persuaded, for substantially the same reasons as before, of the arguments of the hon. Member for Huntingdon. I therefore ask him to consider withdrawing the amendment. If he does not do so, we will feel it necessary to oppose it.

Jonathan Djanogly: Under these provisions, there will be a wider variety of people who can be sued, it will be possible to sue people for a greater variety of offences, and there will be a more straightforward procedure by which to sue people, which I think the Minister called a clearer and more accessible procedure. I foresee that the net result will be that more people will, indeed, be sued, as my hon. Friend the Member for North Wiltshire (Mr. Gray) suggested.
	The Government have introduced certain amendments to tighten this part of the Bill, introducing the two-stage process, which in itself could be contentious—I have doubts that it will, in the event, save costs. While we note the requirement for the claimant to establish a prima facie case in order to obtain permission to continue a derivative claim, the introduction of the threshold does not entirely address the concerns about frivolous litigation. For certain categories of claim, it will be easy to establish a prima facie case, and the threshold might not act as a deterrent. The best example that I can give is where directors or the company have been fined for regulatory breaches. Evidence of the conviction will itself amount to a prima facie case of breach of duty under clause 243(3). The threshold is also no answer to the concerns that arise from allowing shareholders to bypass the board when commencing a derivative claim.
	We remain concerned that part 11 empowers shareholders to commence litigation against the directors without consulting or informing the board. That increases the chances of tactical litigation, as I have made clear. Secondly, it will create the capacity for disruption. Thirdly, it will give the shareholder a primary, rather than a derived, right to bring a claim in the company's name. On that point, we have common ground with the Liberal Democrats; it comes to the fore in relation to amendment No. 415.
	9.30 pm
	It is a fundamental principle of company law that directors owe their duties to the company, and the company thus has the primary right to sue them in respect of wrongdoing. At present, a shareholder derives a right to sue in a company's name in particular circumstances, including because the wrongdoers who control the company will not exercise the company's primary right to sue. By failing to include a requirement that the board be consulted on, or informed about, a shareholder's intention to sue the directors in the company's name, the company will be deprived of an opportunity to exercise its primary right to sue in any circumstances in which the shareholder chooses not to consult the board. We were not convinced by the Minister's response to that point, so although I will not press amendments Nos. 412 to 414 to a Division, I will press amendment No. 415. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Amendment proposed: No. 415, in page 121, line 33, at end insert—
	'(6) A derivative claim under this Chapter may only be brought if the directors have been requested by a member of the company to bring a claim in respect of an act or omission specified in subsection (3) and have not agreed to the request after the expiry of a reasonable period from service of the request.'.— [Mr. Djanogly.]

Question put, That the amendment be made:—
	 The House divided: Ayes 191, Noes 287.

Question accordingly negatived.

Clause 265
	 — 
	Derivative proceedings

Amendment made: No. 171, in page 125, line 4, leave out '461(2)(c) of the Companies Act 1985 (c. 6)' and insert '963(2)(c)'.— [Margaret Hodge.]
	Further consideration adjourned .—[Mr. Alan Campbell.]
	 Bill, as amended in the Standing Committee, to be further considered tomorrow.

REGULATORY REFORM

Motion made, and Question put forthwith, pursuant to Standing Order No. 18(1)(a) (Consideration of draft regulatory reform orders),

landlord and tenant

That the draft Regulatory Reform (Agricultural Tenancies) (England and Wales) Order 2006, which was laid before this House on 5th July, be approved .—[Mr. Alan Campbell.]
	 Question agreed to.

DELEGATED LEGISLATION

Motion made, and Question proposed,
	That the Strategic Health Authorities (Establishment and Abolition) (England) Order 2006 (S.I., 2006, No. 1408), dated 25th May 2006, and the Statement of Changes in Immigration Rules (Cm 6918) be referred to Standing Committees on Delegated Legislation. —[Mr. Alan Campbell.]

Stephen O'Brien: I am grateful for the chance to discuss this important matter, which might not have arisen had the previous business run to the moment of interruption.
	An important question must be asked of Ministers on the Treasury Bench, who do not include a Health Minister— [Interruption]. I see the Minister of State, Department of Health, the hon. Member for Don Valley (Caroline Flint), running to take her place. I welcome her to the debate. I hope that she is considerably more briefed on the statutory instrument than I have had the opportunity to be.
	The statutory instrument was laid before the House on 2 June this year, when Parliament was sitting and capable of dealing with it. The arrangements that the order implements were put into practical effect—came into force—on 1 July, when the House was still sitting. The question is, why are we faced this evening with a statutory instrument that was laid before the House on 2 June? I am sure that the Minister will be able to explain the reason.

Andrew Murrison: My hon. Friend will have read in the explanatory note on the order that
	"A full regulatory impact assessment has not been prepared for this instrument as it has no impact on the costs of business, charities or voluntary bodies."—

Mr. Speaker: Order. I must give a ruling here. We should not debate the order. We are considering whether the order should be referred to a Committee, not the merits of the order itself.

Peter Bottomley: On a point of order, Mr. Speaker. This is in no sense a challenge, but my hon. Friend the Member for Westbury (Dr. Murrison) has read out part of the explanatory note on the order. Under that heading—in brackets and italics, so it may not count—appear the words:
	"This note is not part of the Order".
	Presumably, therefore, debating that is not debating the order.

Mr. Speaker: This is getting too technical even for the Speaker. What we are going to do is talk about whether the order is to go into Committee, where such tricky little things can be discussed.

Stephen O'Brien: I am grateful for your ruling, Mr. Speaker. It had struck me that to debate the point that my hon. Friend the Member for Westbury made, very perceptively, would have been to discuss the substance of the order. I recognised that that would not be relevant this evening, as your ruling on the point of order confirms.
	What matters is the fact that the order came into effect on 1 July, it having being laid before Parliament on 2 June—six or seven weeks before the House rose for the long summer recess. Why was not the order laid before the House and time found for a debate, so that we might understand the serious consequences that flow from it?
	I fully accept Mr. Speaker's ruling that we must not debate the substance of the order. Schedule 2 abolishes all the strategic health authorities with which we were so familiar and which existed in our various constituencies across England, albeit not in Scotland. Schedule 1 replaces them with a lesser number of strategic health authorities but, interestingly, there were issues about the transfer of staff, so there will be no difference. Will the Minister explain why the House was not given the opportunity to debate the order and possibly to vote to refer it to Committee? That would have allowed us to discuss the substance.

Damian Green: My hon. Friend has ensured that a Health Minister is present on the Front Bench to discuss whether one of the orders covered by the motion should be referred to Standing Committee. The other order mentioned in the motion relates to changes in immigration rules. I hope the Government can provide a Home Office Minister to discuss the second and equally important part of the motion.

Mr. Speaker: Too long. Mr. O'Brien, have you any more to add?

Stephen O'Brien: The point raised by my hon. Friend the Member for Ashford (Damian Green) was a point of order, so I do not need to refer to it.
	The Minister must deal with the extra cost has been placed on the processes of the House and therefore on the taxpayer, now that we are challenged to consider the order after it has been put in place. I ask you, Mr. Speaker, to consider, and I hope the Minister will also think about, the feelings of members of strategic health authorities who have recently been appointed. What must they think of a Government who suddenly put before Parliament a measure that may or may not be referred to Committee to confirm the job that they have just secured?

Mr. Speaker: Order. The hon. Gentleman is getting so desperate that he is drawing the Chair into his argument. Let us hear what the Minister has to say.

Stephen O'Brien: I hope the Minister will rise to the challenge of explaining why the order has appeared now and give the House a response.

Nigel Griffiths: I shall give more than a response—I hope I shall give the House a very satisfactory response. It is clear from the motion, that the position has been set out. The Opposition have had June, July, August, September and now October to consider it. I note that neither my right hon. Friend the Leader of the House nor I received any intimation that this was an unsatisfactory way of proceeding on the matter. Perhaps the Opposition spent rather too long earlier not listening to the previous debate but formulating a way of raising the matter on the Floor of the House.
	Let me explain in clear terms. In the 19 years that I have been in the House, I have heard some spurious points of order. I congratulate the hon. Member for Eddisbury (Mr. O'Brien) on the creative way in which he raised the point of order. He has done very well. Far be it from me to criticise the Speaker—

Peter Bottomley: The Minister has twice referred to my hon. Friend the Member for Eddisbury (Mr. O'Brien) raising a point of order. I thought the motion was debatable and I thought my hon. Friend debated it.

Mr. Speaker: I will let the Minister know when he is out of order. I can assure the hon. Gentleman that the Minister is in order.

Nigel Griffiths: Thank you, Mr. Speaker.
	The motion states clearly that the order for the establishment or abolition of SHAs should be referred to Standing Committees on Delegated Legislation. As all hon. Members will know, those Standing Committees are made up of Members from all parties in the House. If they have points to raise about the propriety of the terms of the order, that is the place to do it. As the hon. Member for Eddisbury (Mr. O'Brien) would know if he had ever been a Minister—several hon. Members on the Conservative Benches have been Ministers and, indeed, members of the Cabinet—it is not uncommon for such orders to be presented to the House of Commons with a deadline that, if it has expired by the time the Standing Committee considers them, does not negate the very valuable contribution that Standing Committees make.

Douglas Hogg: Will the Minister give way?

Nigel Griffiths: I will be very happy to give way to the right hon. and learned Gentleman, and, after him, as he is a right hon. and learned Member, to the hon. Member for Eddisbury(Mr. O'Brien), because he will tell us from his own experience in Cabinet that the way in which this matter has been handled was inherited from the previous Government.

Douglas Hogg: If the Standing Committee does not approve the order, there will be redundancy costs. What are the redundancy costs?

Mr. Speaker: Order. That is a matter for the Standing Committee. That is where the right hon. and learned Gentleman will get those answers, not here on the Floor of the House at this stage.

Nigel Griffiths: Your very succinct answer, Mr. Speaker, shows why you are Mr. Speaker and I am a humble Minister. I give way to the hon. Member for Eddisbury.

Stephen O'Brien: I would very much like quickly to ask this humble Minister—given that I have never been a Minister I cannot possibly know the answer, but he will—what, if the order were to be defeated, would be the consequences?

Nigel Griffiths: The consequences would be dire. I have every confidence that Members considering this matter in the Delegated Legislation Committee will reach a proper conclusion—that the Government were right to table the order on 2 June, that it was the right procedure to take, and that it was the best decision for the health service and for health authorities—and will approve it.

Andrew Lansley: rose—

Nigel Griffiths: I know that the Opposition Front-Bench spokesman is desperate for help. He could not have a better champion than the Conservative health spokesperson.

Andrew Lansley: Given that the Government's decision enshrined in the order is so perfect, that it was perfect in 2002 when there was a similar order, that it was perfect in 2004, as the revocation has made clear, and that it is presumably perfect in 2006, the Government's intention is to revoke all of this in 2008 and change it all again.

Nigel Griffiths: That is a rather clever point, but I note that the hon. Gentleman was not a member of the Standing Committees that considered such delegated legislation as he is now criticising. The House came to a view that those were the right measures in 2002, 2003, and in the other years that he mentioned. We are coming close to 10 o'clock and I do not wish to enjoy an Alan Clark moment at the Dispatch Box. I have given away enough. This is an order that is worth supporting and I commend it to the House.

Peter Bottomley: On a point of order, Mr. Speaker.

Mr. Speaker: Order. I am putting the question.

Peter Bottomley: This is a debatable motion, Mr. Speaker.

Mr. Speaker: Order. The Minister has replied to the debate.

Peter Bottomley: On a point of order, Mr. Speaker.

Mr. Speaker: Order. I will take the point of order after I have put the question.
	 Question put and agreed to.

Peter Bottomley: On a point of order, Mr. Speaker. Is that the shortest debate that has been terminated?

Mr. Speaker: I do not understand the point of order. Perhaps the Library will provide that information.

BEACH SAFETY

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Alan Campbell.]

Julia Goldsworthy: I am grateful for the opportunity to raise the issue of lifeguarding.
	I shall begin by mentioning a couple of facts. First, I am a new member of the surf life saving association in the village where I live, Portreath, and I am learning lots at first hand about beach safety. Secondly, I managed to fall off a cliff when I was 17, which resulted in my needing to be rescued, so I have first-hand experience of such matters.
	All hon. Members appreciate that the south-west is an important tourist destination, and in many places the principal attraction is the coastline. The issue of safe beach lifeguarding is important to many families, and we have visitors to the south-west in their millions. West Cornwall alone had 1.4 million visitors between May and September this year, and the holiday season is increasing for a variety of reasons. One reason may be global warming, which means that we are getting unseasonably warm weather. One need only look at the front page of yesterday's edition of  The Guardian, which showed a little girl paddling in the sea in Sussex. Another reason may be the increasing popularity of surfing, for which there are better conditions outside the peak summer weeks. Surfing is a sport that is growing in popularity, so we are seeing greater numbers in a longer season. Furthermore, we have more sophisticated materials that mean that it is possible to stay warmer for longer if one happens to venture into the water outside the summer months. Whatever the causes, more and more people are visiting beaches over a longer period of time. Although that is undoubtedly good news for the economy in the south-west, it has implications for lifeguard cover.
	I want to draw the Minister's attention to some figures from the Royal National Lifeboat Institution. The RNLI assisted 10,000 people last year, which was 2,000 more than the previous year. It saved 71 lives and carried out 718 rescues, assisting 1,448 people, and those figures cover only the beaches where the RNLI provides cover. The key question is whether lifeguard cover reflects that changing need. Unfortunately, the answer seems to be no.
	At the moment, lifeguard cover is discretionary, and it is provided by local authorities mainly on an historical basis. In some cases, they provide it on publicly owned beaches; in others, they provide it on privately owned beaches. The service is discretionary in terms of not only whether there is lifeguard provision, but whether there are warning signs, whether there is any emergency equipment and even whether there is an emergency telephone. Because there is no statutory requirement to provide the service, and because there is no accompanying funding as a result, local authorities are increasingly hesitant to increase their cover or provide new services. In Kerrier and Penwith, many local authority-owned beaches are manned by only one lifeguard in the summer, with inferior equipment to that provided on RNLI-lifeguarded beaches.
	The season cover provided by local authorities is getting shorter. Anything that is not a statutory service experiences budgetary pressures to a disproportionate extent, a point which is made clear in a letter that I received yesterday from Kerrier district council:
	"Kerrier historically has provided its own life guard service and is proud of the service provided to date. There are always issues regarding the funding of discretionary services in both revenue terms and the capital investment needed to upgrade equipment...There remains pressures to reduce the cost to the council tax payer in Kerrier and this could take the form of asking private beach owners for contributions towards service provision or even removing services."
	The council states that a final decision has not been made, but the threat is there. These pressures are mainly reflected in two areas, the first of which is the length of the season when cover is provided on local authority owned or provided beaches. Kerrier district council says in its letter:
	"As regards maintaining existing levels of service Kerrier has already reduced the service to cover its main beaches during the summer peak periods and the shoulders of the season, especially half terms. This service used to include a winter patrol where, during the winter months, a beach was patrolled according to predicted surf conditions."
	I went to visit the RNLI lifeguards at Perranporth the other week, when it was very quiet because the conditions were quite rough. I talked to the lifeguard, who lives in Portreath. He said that he has had very quiet days on the beaches that he covers in Perranporth, but when he returns home to a more sheltered cove he has found up to 150 people using the beach with no lifeguard provision at all. At a time when using the beaches is becoming increasingly popular, even in the autumn and earlier in the spring, cover is being withdrawn, and is not reflecting the areas that people are visiting.

Matthew Taylor: As I am sure that my hon. Friend is aware—I want the Minister to reflect on this—the availability of effective and cheap bodysuits and wetsuits means that many beaches are being heavily used right through the year. This is not simply a matter of whether local authorities can maintain the cover that they used to provide. There is now a need for much more extensive cover through the year than there was before. I think that my hon. Friend will be able to confirm the number of recent incidents that have required rescue in what would traditionally have been a part of the year when there was virtually nobody in the water.

Julia Goldsworthy: I thank my hon. Friend; I was just coming to that. I have been flicking through my local newspapers from recent weeks, and they contain several examples. On 21 September, four people had to be rescued dramatically from Hayle Towans. A father and his three sons, who were on holiday, got into trouble on the beach where there was no lifeguard provision, and the coastguard had to be called out. There is a similar story from Newquay on 7 October. The RNLI, commenting on an event where surfers had to be rescued, said that if lifeguards had been on duty, there would have been red flags that would have dissuaded people from going into the surf in such treacherous circumstances. The problem is that surfers sometimes look on bad weather as a bit of a treat and an extra challenge. There need to be clear signals that these are potentially very dangerous waters. People visiting the area may not understand the local conditions, which may not be immediately visible.

Colin Breed: My hon. Friend raises some important issues. There is great variability. Some beaches have several lifeguards, or have them for a few hours, while others do not have them at all. People who visit various beaches when they come on holiday may find services on one beach and expect them on another where they are not provided. There is no uniformity or co-ordination in terms of the availability of beach safety.

Julia Goldsworthy: My hon. Friend is right. The situation is not predictable. That uncertainty is becoming even more of a problem where local authorities that have historically provided services on privately owned beaches begin to think, because they are discretionary services and there are budgetary pressures, that if a private beach owner is making a profit from it, they should make a contribution.

Daniel Rogerson: Does my hon. Friend agree that the situation is further complicated in the case of beaches—there are some in my constituency—with multiple landowners, some of which may be involved in businesses that derive benefit from their involvement, such as farmers?

Julia Goldsworthy: I will come to that in due course. At this point, I am talking about entirely privately owned beaches. One example is Saunton Sands, a very large and popular privately owned beach in North Devon. North Devon district council felt that it was no longer able to provide these services on its own, but when it withdrew them, the private landowner had no responsibility to provide additional cover, so a very popular beach now has no lifeguard provision whatsoever. As my hon. Friend said, the matter can get more complicated because beaches are not entirely privately owned or entirely owned by the local authority; in some cases, a significant number of people have some kind of ownership. In my home village of Portreath, the beach is partly owned by the local authority, partly owned by the local village improvements committee, and partly privately owned. If there is to be a statutory responsibility, it will not be easy to resolve where it should lie in cases of multiple ownership.

Alison Seabeck: As the hon. Lady knows, I was a lifeguard in a previous life. When a public pool becomes overcrowded, the lifeguards can close it and get people out of the water in safety. I have corresponded with the Health and Safety Commission and the position on a beach is incredibly ambiguous. Once people are in the water, who has the duty of care? I am pleased that the hon. Lady has called the debate and I await the Minister's response with interest.

Julia Goldsworthy: I thank the hon. Lady for intervening. I was about to refer to some correspondence that she had with the RNLI and the Health and Safety Commission. She asked about statutory responsibility for safety and whether risk assessments should be made on the beach. The HSC response made it clear:
	"Where a beach is being actively maintained as a leisure amenity on which members of the public are encouraged to use services... the operator... will need to conduct a risk assessment."
	That sounds straightforward, but the second paragraph states:
	"However, while the duty of care would include the beach down to the low water mark, the sea itself would not be part of the undertaking, so there is no obligation under health and safety law to assess the risks of swimming or provide control measures such as lifeguards."
	That is a ridiculous anomaly: the place where people are most likely to drown is the one area where no risk assessment currently takes place.
	The issue is complex and becomes increasingly so when there is more than one owner of a beach. However, the RNLI is working hard to try to clarify the position. There has been a pilot in the south-west since 2001, whereby the RNLI helps extend the season of cover. For example, in Carrick, where the RNLI helps provide lifeguarding services, the season of cover is extended, there is access to better equipment and the organisation looks to provide work placements abroad so that the turnover of lifeguards is not so high and they have a winter as well as a summer job.

Annette Brooke: Dorset, especially Poole, where there is a beautiful beach, which many of my constituents use, is well served by the RNLI. There is funding, which the RNLI regards as adequate, but the big problem is that, unless responsibility is made clear shortly, the local authority may dip into that money. The service is currently excellent.

Julia Goldsworthy: Partnership working between the RNLI and local authorities already happens but the relationship is vulnerable without clarity about statutory responsibility. The RNLI is worried that, with increasing pressure on local authorities, they will slowly start to withdraw and the RNLI will be left holding the baby.
	The Government have been aware of the problem for some time. The Transport Committee raised the matter in 2005 and suggested a meeting with local authorities and the RNLI. The meeting took place and I understand that both parties were initially positive, but there has been no formal response. Although the RNLI met the Under-Secretary of State for Communities and Local Government, the hon. Member for Basildon (Angela E. Smith) on 19 July to discuss duty of care issues, again there has been no formal response. That is frustrating for those who are worried that services are being eroded and time is ticking on.
	Let me summarise the problems. Unclear statutory responsibility means that there is no funding, and many local authorities with a significant coastline find that a great burden. There are also complications about beach ownership. I appreciate that that cannot be cleared up immediately or quickly, but progress needs to be made.
	The RNLI proposes a compromise, which offers a viable way forward. It suggests that any beach that exceeds a specified amount of usage, whoever owns it, triggers a risk assessment of whether there should be lifeguard cover or more emergency equipment. The RNLI offers to undertake that risk assessment free of charge, provided that it goes on to determine the cover that is needed. That process could trigger negotiations about who is responsible for the duty of care on the beaches. Again, it needs to be accompanied by clarification from the Government.
	If the proposal gets Government approval, it could result in the roll-out of the RNLI's support through lifeguard provision, not only in the south-west, where it has already proved beneficial, as my hon. Friends testified, but in places such as Brighton, which cry out for access to those extra resources. If the programme that has been trialled in the south-west cannot be rolled out, we will experience declining provision when use of beaches is increasing.
	This is not an easy issue to resolve. There have been plenty of warm words, but, unfortunately, not enough action. I hope that the Government will take up the RNLI's offer, and that there will be an opportunity to respond formally to the representations made over two years. There is a fantastic opportunity before us. Cornwall's surf life saving clubs are among the most vibrant in the country, providing beach and pool lifeguards to the highest standards. The county is also bidding for the 2010 world surf life saving championships, which would be an amazing prelude to the Olympics and a real way to champion the popularity of the sport and to put Cornwall on the map. It would be ironic if we were hosting such an event but not providing world-class surf life saving lifeguard cover.
	I do not want to see our position undermined. The Minister and her Department have had long enough to consider this problem. We need to see progress, and I hope that I shall receive assurances from her tonight that that will be the case.

Andrew George: I congratulate my neighbour and hon. Friend on securing the debate. I also declare an interest as a former member of the Polurrian Surf Life Saving Club in my constituency, which is also in the shared district of Kerrier.
	Some important issues have been raised. First, although the meeting in December with the Minister's predecessor involved local authorities, I emphasise that they have not been fully involved in discussions since. Certainly, the Royal Life Saving Society needs to be involved in discussions henceforth, as it has a large body of experience in this area.
	Secondly, under financial regulations, as local authorities understand them, any expenditure over £20,00 must be put out to tender. In view of that, any contracts in relation to beaches that are the responsibility of local authorities must be put out to tender in each and every case. As far as future contracts and arrangements are concerned, that issue should be thrown into the melting pot.
	Thirdly, local authorities in my area—Penwith as well as Kerrier—have 35 years' experience of beach safety management. Therefore they have worked on risk assessments, and duty of care and ownership issues, with the search and rescue service—which is also based in my constituency—the Maritime and Coastguard Agency, the Royal Life Saving Society and the Chartered Institute of Environmental Health. They have developed risk assessments, which are now being rolled out on beaches monitored and patrolled by local authorities. It is important that that be considered in any future work undertaken. This issue is particularly knotty, and many people should be involved to help the Government, and each other, to find a solution. I hope that all partners and stakeholders will be involved.

Meg Munn: I congratulate the hon. Member for Falmouth and Camborne (Julia Goldsworthy) on securing this debate and raising this important issue.
	I have just been racking my brains to remember what was said on the BBC programme "Coast". I think that it was that we are never more than 73 miles from the coast—I might be wrong on the number—wherever we are in the UK. Beach safety is therefore an important issue for us all. Day trips and longer vacations to the seaside are a popular form of recreation. As the hon. Member for St. Ives (Andrew George) knows, only a month ago, I made a ministerial visit to Cornwall, where I took the opportunity to spend a little more time and to visit some of the very nice beaches. Of course, tourism makes an important contribution to local economies in many coastal towns.
	Beach safety impacts on the experience of visitors and can have a significant impact on the reputation of local areas. It is therefore important to local areas that beaches are maintained as good-quality, safe environments for all. I am therefore grateful to the hon. Member for Falmouth and Camborne, other hon. Members and my hon. Friend the Member for Plymouth, Devonport (Alison Seabeck) for raising such points in debate this evening.
	The discussion on how best to promote safety and avoid accidents on our beaches has been with us for some time. As the hon. Lady stated, it was recently raised by the Royal National Lifeboat Institution, which has expressed concerns about the future of lifeguarding in some areas. The concern is that some local authorities, and other beach owners that have funded provision of this service in the past, may be planning to reduce their contributions, owing to budgetary constraints.
	The RNLI is a key player in this field, having provided lifeguard services in the south and west of England since 2001, with 62 beaches being covered in the summer months. According to its own figures, its staff saved the lives of 71 people in 2005, and attended 8,664 incidents. On average, participating local authorities fund 40 per cent. of the cost of providing lifeguard services, which are administered through service level agreements.
	Recently, however, the RNLI has reported that some local authorities are becoming reluctant to renew existing SLAs, and that some are unwilling to contribute towards beach safety generally. The institute wants to reverse that trend and is calling for a lead from central Government on who is responsible for beach safety and lifeguard provision. As the hon. Member for Falmouth and Camborne noted, it has asked for a standard risk assessment for beach safety to be put in place, with a duty to provide lifeguarding once a threshold is exceeded.
	Beach safety provision is a complex issue, however. Looking at how safety on beaches should be provided and who is responsible for it reveals those complexities. The problems include determining who owns the beach and whether there currently exists a legal duty of care for a beach owner to provide protection. Another element involves deciding the practical measures that should be put in place.
	Most beaches are owned by local authorities, whose jurisdiction normally coincides with their boundaries. Coastal local authorities in England and Wales have administrative control and jurisdiction over areas down to the low-water mark. In the main, beaches not owned by local authorities are owned by private companies and charities. In those cases, those bodies would be considered to hold the primary duty of care towards beach users, where there is held to be such a duty.
	Although local authorities have a duty of care towards their service users, there is currently no statutory duty on them to ensure beach safety or produce risk assessments on beach safety. Legally, it would be unreasonable to expect a local authority, or other beach owner, to offer protection against the naturally dangerous properties of the sea. It could also be argued that to impose on any beach owner a duty to protect persons from self-inflicted harm sustained when taking voluntary risks in the face of obvious danger would also be unreasonable.
	As matters stand, it is at the discretion of a local authority or other beach owner to decide whether or not to implement beach safety measures. However, where a beach owner has created a "reasonable expectation" regarding the level of safety of a beach—for example, by promoting it to visitors or previously providing a lifeguard service— that action in itself is generally held to establish a duty of care. In other words, users would be entitled to use the beach on the assumption that appropriate safety measures would continue to be provided. Therefore, if a local authority currently providing lifeguard services decided to withdraw them, there is an argument to suggest that a risk assessment should be carried out first.
	Placing a statutory duty on beach owners to provide beach safety could be viewed as one solution to the problem of ensuring that beaches are safer, and it might reduce the number of accidents and deaths on beaches. Such a course of action could involve requiring all coastal local authorities to risk-assess the beaches falling within their jurisdiction and to provide appropriate remedies to alleviate potential problems.
	Requiring beach owners to risk-assess their beaches and provide safety measures raises a number of practical issues, however. For example, there would need to be guidance about the categories against which a beach should be assessed and who would carry out the assessment. In addition, the guidance should also cover how frequently and when the assessment should take place, as well as what level and type of risk would require safety measures.
	Clearly, placing such a requirement on beach owners would have cost implications. A cost is involved in assessing the risk level on beaches, given that the assessments would need to be conducted by a suitably qualified body.

Julia Goldsworthy: The RNLI has made it clear that it understands that undertaking risk assessments would involve a cost, and that is why it has offered to undertake them. That would overcome some of the problems that the Minister has described.

Meg Munn: If the hon. Lady will bear with me, I shall explain why that might not be as straightforward as she suggests.
	I said that the assessments would have to be carried out by a suitably qualified body, and there is a possibility that that body would have to take out some professional indemnity insurance. Implementing additional safety measures would also carry additional costs. For the majority of beaches that are local authority owned, that could place an additional cost on them which would need to be funded.
	The Government remain committed to ensuring that the net additional costs of new policies that they impose on local government are funded as required under the Government's new burdens rules. These rules help to ensure that the Government do not put pressure on council tax. Furthermore, the forthcoming local government White Paper places a strong emphasis on providing local government with much more scope to take its own decisions on local issues. Our thinking here is that local authorities and their partners are best placed to assess the costs and benefits of actions at local level and to take a view on resulting local priorities.
	In January this year, my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick), then a Minister at the Office of the Deputy Prime Minister but now a Minister at the Department of Trade and Industry, stated to Parliament that there were no plans to place a statutory obligation on local government to provide beach safety, and that remains our view. In practice, however, one must not overlook the fact that many beach owners already provide beach safety measures, including signage and lifeguard services, most notably where a beach is being actively promoted as a visitor destination.
	In addition, the Department for Transport funds the Maritime and Coastguard Agency, which in turn operates Her Majesty's Coastguard. Her Majesty's Coastguard is an on-call emergency organisation responsible for the initiation and co-ordination of all civilian maritime search and rescue within the UK maritime search and rescue region. This includes the mobilisation, organisation and tasking of adequate resources to respond to persons either in distress at sea or at risk of injury or death on the cliffs—I am glad that the hon. Lady avoided that when she was younger—or shoreline of the United Kingdom.

Matthew Taylor: I want to be clear about what the Minister is saying. She seems to be saying that the Government want safety to be provided, and that they encourage local authorities to provide it and do not want them to withdraw it. However, the Government do not want to make it a statutory obligation, because they would then have an obligation to ensure that the appropriate funds were available. Is that correct?

Meg Munn: If the hon. Gentleman listens a little more carefully, he will understand that I am saying that it is for local authorities to decide what they want to spend their money on in their local areas. Clearly, a local authority such as mine would not have a need for such expenditure, but would need to spend money on other things. I hope that the hon. Gentleman will bear with me, because I want to continue to develop these points, and we are getting a little short of time.
	Local authorities that have expressed their views on the subject of beach safety and lifeguard provision state that they do accept a duty of care for the beaches that they own, and that they can and do carry out risk assessments. They wish to retain the discretionary power to choose what cover to provide, and those that use the Royal National Lifeboat Institution service value it but do not wish to be tied to using one provider. This picks up on the point raised by the hon. Lady a few moments ago. In some cases, they choose to use voluntary lifeguards such as those trained by the Royal Life Saving Society.
	There are other incentives for local authorities to provide beach safety measures. Tourism is a powerful economic driver, and a further powerful draw for local areas is the number of beaches that possess a seaside or blue flag award. The seaside award recognises well managed beaches that are clean and safe. There are two categories—rural and resort—and 242 beaches in England hold this award at present. The blue flag campaign recognises beaches throughout Europe that fulfil strict criteria relating to both water quality and the surrounding beach area. To be considered, a beach must have attained the guideline standard of the bathing water directive before being assessed for various other criteria. In England, 93 beaches hold this award at the moment. The guidance for these awards specifies that a risk assessment should be conducted by an appropriately qualified person, following which any necessary beach safety measures should be put in place—for example, a requirement for lifeguards to be on duty during the summer season and for a record of all incidents to be maintained. Because tourism and economic development are discretionary services at local authority level, however, pursuing such awards cannot, and should not, be enforced.
	To conclude, it is clear that the issue of beach safety is a complex one that requires a number of elements to be resolved, including funding, the practicalities of imposing risk assessments and follow-up measures, how to include private beach owners, and clarity on legislation. As I said earlier, we stated to Parliament in January 2006 that there were no plans to replace the current discretionary power to provide beach safety measures and undertake risk assessments with a statutory obligation to do so. Indeed, the forthcoming local government White Paper will highlight the importance of reducing top-down control and allowing local people and places greater discretion to decide priorities for their areas. There can be few more local issues than beach safety, and it follows from this that it would be for a local authority and its partners to decide whether the level of priority—
	 The motion having been made at Ten o'clock, and the debate having continued for half an hour, Mr. Speaker  adjourned the House without Question put, pursuant to the Standing Order.
	 Adjourned at half past Ten o'clock.